Energy Market Update 2-6-2024

Crude is up 54 cents??? RB is up 80 points????? ULSD is up 21 points

Overview

Energies are higher as progress remains elusive in Mideast ceasefire talks.

Two more vessels with US and UK links came under attack from Yemen's Iranian-backed Houthi rebels said on Tuesday, in what was described as separate attacks in the Red Sea. (Quantum) An Iran-backed militia group in Iraq claimed responsibility Monday for a drone strike against a base in eastern Syria used by U.S. troops that killed six American-allied Kurdish fighters. The attack, which caused no American casualties, appeared to be the first significant response from what the U.S. calls Iran's proxy groups to U.S. airstrikes against the militias in the region. (CBS News)

On Monday, the Saudis announced their Official Selling Prices (OSP) for March loadings. The key price many focus on --the flagship A-Light price for Asian customers- was left unchanged. This left the price at +1.50 versus Platts Dubai/DME Oman at a 27 month low. The move surprised market watchers as the top oil exporter was expected to raise its official selling price by 50 cents amid supply disruption concerns, according to analysts. The price of Medium grade crude to Asia was lowered by 20 cents, while that for Heavy crude was left unchanged. Prices to N.W. Europe and the Med were left unchanged. The A-Light price to the U.S. was lowered by 30 cents. Fitch Ratings says that Saudi Arabia will need prices to average more than $90 a barrel this year to balance its budget.

January gasoline exports from the Med/Europe were the highest since last April, as per LSEG data. Quantum Commodities pegged increased demand from the Mideast and Latin America. This has helped boost European gasoline cracks to a 5 month high, as per Quantum reporting.

Notable yesterday was the sharp increase in the front end curve valuations in RB and ULSD. The March versus May spreads widened by 156 and 160 points respectively. This underscores the low refining capacity usage seen in the U.S. lately amid the January weather-related disruptions and the beginning of maintenance work.

Technicals

Momentums are pointing lower, although today's move up suggests a near term trading range as the market digests Mideast tension versus some demand concerns.

WTI spot futures see support at 71.79-71.85. Resistance at 73.56-73.64 was almost tested today with a high at 73.54. Above that resistance lies at 74.91-74.98.

March RB sees resistance at 2.2416-2.2429 and then at the 2.26 area. Support lies at 2.1717-2.1734.

March ULSD sees support at 2.6960-2.6984. Resistance comes in at 2.7617-2.7629 and then at 2.7863-2.7900.

Natural Gas--NG is down 3.1 cents

NG prices are lower as the range bound trading pricing seen over the past week continues. Is this range a result of shorts unwilling to push much near $2? --but longs/buyers are not convinced of upside?

Notable in Monday's trading is the fact that the front month March settled higher by 3 tick, while every month behind it until July 2025 settled lower. The March April spread rose above flat in the process, in what we believe may be short covering and/or pre-index roll positioning. The double index fund roll from March to May begins tomorrow.?

LSEG estimated 358 heating degree days (HDDs) over the next two weeks, up from 333 HDDs estimated on Friday. The normal for this time of year is 408 HDDs. LSEG forecast U.S. gas demand in the Lower 48, including exports, would fall from 122.5 BCF/d this week to 122.4 BCF/d next week.

NG technically has neutral momentum that is oversold. Support lies at the recent low at 2.021 and then at the lows seen last April at 1.944-1.946. Resistance lies at the highs seen the past week at 2.119-2.127 and then at 2.158-2.168.

Disclaimer

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