Energy Market Update 2-5-2024

Crude is up 8 cents??? RB is up 1.25 cents??? ULSD is up 2.94 cents

Overview

Crude oil prices are near unchanged as they were hurt overnight as the dollar rallied on the back of the strong jobs report seen Friday and Chinese economic data disappointed. Product prices are higher supported by the shipping delays due to the Red Sea transit issues.

Friday's Non Farm Payroll report showed job growth accelerating in January and wages up by the most in nearly two years. The data "pushes the timeline for Fed's highly anticipated cutting cycle out into the second quarter", said one investment analyst. Federal Reserve Chairman Jerome Powell on Sunday said that the strength of the economy allows the Fed to be "careful" in deciding when to cut interest rates.(Reuters/Marketwatch)

Caixin's Chinese Services PMI disappointed. January's reading of 52.7 was below the forecast of 53.0. January's reading was less than the December one of 52.9. (Investing.com)

Longer shipping times for middle distillates from the Middle East and Asia into Europe are leading to some tightness in Europe. Europe has become increasingly reliant on middle distillates from Asia and the Middle East since the EU ban on Russian oil and refined products. (ING)

In Russia, two Ukrainian attack drones struck the largest oil refinery in the country's south on Saturday, a source in Kyiv told Reuters, the latest in a series of long-range attacks on Russian oil facilities which has reduced Russia's exports of naphtha, a petrochemical feedstock. Lukoil, which owns the 300 MBPD Volgograd refinery, later said the plant was working as normal. In related news, Russian gasoline exports slumped by a third in January as attacks and maintenance hit supply. Russia redirected supply to the domestic market. (Quantum Commodities/Reuters)

The down move in crude prices comes even as the U.S. led retaliatory on Iran-backed militants over the weekend. A coalition targeted Iran-backed rebels in Yemen, while Washington warns of further retaliation for an attack that killed 3 U.S. soldiers. Anticipation has grown of further American reprisals against Iranian forces and allied groups in Syria and Iraq. (WSJ)

The oil rig count was unchanged in Baker Hughes latest report issued Friday.

Money managers raised their WTI net length by 18,082 contracts on ICE/CME combined in the week ended Tuesday Jan.30 in CFTC data issued Friday. RB net length rose by 1,844 contracts. while that for ULSD rose by 6,914 contracts. Money managers increased their net long in ICE Brent by 53,269 lots. Their total position is the largest held since September, as per ING analysis. However, given that the bulk of this move was made up of fresh buying and considering the price action in Brent since last Tuesday, it is likely that a large amount of these fresh longs have already liquidated, ING adds.

Technicals

Momentum remains negative for the energies. Products are having inside days today, while crude prices fell overnight to their lowest level since Jan. 17.

WTI has support for March futures at 71.17-71.25. Resistance lies above at 73.56-73.64.

March ULSD sees support at the overnight low at 2.6594-2.6611, Resistance comes in at 2.7305-2.7329.

RB March futures see support at 2.1212-2.1224. Resistance lies at 2.1922-2.1931.

Natural Gas--NG is down 2.4 cents

NG prices are lower now after attempting to rally overnight. The rally was due to forecasts for colder weather seen arriving in the middle of the month. But, as a colleague said: " hurdles remain for a sustained rally."

Money managers raised their net short position significantly in the CFTC report seen Friday. In the week ended Tuesday Jan. 30, the net position rose by 32,584 contracts to a total of 70,011 contracts.

While European natural gas prices have seen some strength recently, the market is likely to see limited upside. TTF continues to trade below Euro 30/MWh and with storage more than 69% full (versus a 5-year average of 56%), we continue to believe that Europe will exit this heating season with very comfortable storage, ING writes. They added that in the absence of any supply shocks or demand spikes, we see further downside as we move towards the end of the heating season. TTF prices today for the spot March futures are worth Euro 28.45/ Mwh, equal to $8.34/MMbtu. Weak demand from Europe’s industry, due to lower consumption and weak economies, has been one of the reasons of the gas price slump this winter, despite the peak demand period for heating, as per Oil Price.

In Asia, the north Asia LNG-AS price rose by 10 cents last week to $9.60/MMbtu. The $9.50 price seen in the previous week was a 7 month low. A Reuters analyst writes that the price is continuing to meander at low levels amid ample supply from major exporters and signs that winter demand is easing in the top-importing regions of Asia and Europe. LNG imports in Asia hit a record high of 26.49 million metric tons in December, according to data compiled by commodity analysts Kpler. The strength seen in December was largely carried over into the start of 2024, with January imports being assessed at 26.13 million tons. December's imports were 12.6% higher than the same month in 2022, while January's were 11.8% more than the same month a year earlier. (Reuters/Oil Price)

The Baker Hughes rig count issued Friday showed a drop of 2 units.

Technically NG has momentum that is oversold basis the DC chart. But it is hard to advocate that prices have bottomed. Support lies at last week's low at 2.021 and then at the major lows from last April at 1.944-1.946. Resistance comes in at the highs from last Wednesday/Thursday at 2.158-2.168.

Disclaimer

This article and its contents are provided for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.

Commodity trading involves risks, and you should fully understand those risks prior to trading. Liquidity Energy LLC and its affiliates assume no liability for the use of any information contained herein. Neither the information nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Any opinions expressed herein are subject to change without notice, are that of the individual, and not necessarily the opinion of Liquidity Energy LLC