Energy Market Update 2-8-2024

Crude is up 91 cents????? RB is up 4.32 cents??? ULSD is up 1.65 cents

Overview

Energies are higher as ceasefire talks have stalled after Israel rejected Hamas' demands. Also supportive is the boost from the product supply data seen in the DOE stats yesterday.?

The DOE data was most supportive for gasoline with a surprise draw of 3.146 MMBBL;? a small build was forecast. Gasoline demand rose by 663 MBPD for the week to a total 8.807 MMBPD, beating last year's demand of 8.428 MMBPD, but lagging that of 2022 of 9.126 MMBPD. Crude oil supplies rose by 5.52 MMBBL, as crude imports rose by 1.3 MMBPD. Gulf Coast crude supplies rose by over 6 MMBBL. U.S. crude production rose on the week to 13.3 MMBPD, up 300 MBPD from the prior week and tying the record production level. Distillate supplies fell by a little over 3 MMBBL, a bit less than was seen in the API data. Distillate demand rose by 60 MBPD to 3.817 MMBPD, beating last year's figure of 3.762 MMBPD, but lagging 2022 demand of 4.296 MMBPD.

Total Energies has shut its Port Arthur refinery in Texas just a few days after it restarted. The plant was shut following a power outage that occurred in mid-January. The Port Arthur site has a refining production capacity of 185 MBPD and a total processing capacity of 238 MBPD. Meanwhile, BP's Whiting refinery, that recently experienced a power outage, will remain shut for three weeks sources told Reuters. The refinery has to undergo inspections before it is put back into operation. Should the inspections uncover any problems, the refinery could stay shut for longer than three weeks. (Oil Price)

In addition to Israel rejecting Hamas' demands, Mideast tension has been ratcheted up by a U.S. drone attack in Iraq that killed a commander of the Iran-backed Iraqi militia blamed for a deadly strike at a U.S. base in Jordan last week. The killing of the high ranking official set off protests against the U.S. in the streets of Baghdad. (WSJ)?

Inflation data out of China is seen as a negative for energy prices. China's CPI fell 0.8% in January on an annual basis, more than the median estimate for a 0.5% decline in a Reuters poll. This was its fourth straight decline and its biggest drop since 2009. China’s PPI fell 2.5% in January from a year earlier, the National Bureau of Statistics reported Thursday. The fall in the PPI was the 16th in a row. (CNBC)

Technicals

Momentum for the RB & ULSD have turned positive as all the energies have stepladder up looks since bottoming 5 days ago. Yesterday, the WTI spot futures saw their narrowest trading range for a session since August 22, 2023. The range for WTI yesterday was 99 cents top to bottom.

WTI spot futures see support at 73.13-73.23 and resistance at 75.75-75.83.

RB March futures see support at the overnight low at 2.2610-2.2627. Resistance lies at 2.3167-2.3170, which is the overnight high. The DC chart's upper bollinger is right there as well. Above this the next resistance lies at 2.3405.

ULSD for March sees support at 2.8115-2.8130, which is above the overnight low of 2.8064. Resistance lies at 2.8763-2.8778.?

Natural Gas--NG is down 2.9 cents

NG are lower after trying to rally back to $2 overnight as the American model's weather forecasts turned warmer. The question is if there is enough eagerness for bears to push lower with prices below $2. But, overall the question is whether the cold set to arrive in? a week's time will last long enough to spur an adequate demand boost. Or will it take news of producers dialing back production to spur upward price action ?

The EIA NG storage data is seen as a draw of 74 to 77 BCF. This compares to last year's draw of 208 BCF and the 5 year average draw of 193 BCF.

LSEG forecast U.S. gas demand in the Lower 48, including exports, would rise from 122.6 BCF/d this week to 125.1 BCF/d next week. Those forecasts were higher than LSEG's outlook on Tuesday by a total of 1.3 BCF/d. LSEG said gas output in the U.S. Lower 48 states rose to an average of 105.5 BCF/d so far in February from 102.1 BCF/d in January. That, however, was still below the monthly record high of 106.3 BCF/d in December. This uptick in production seen this month has been cited as one of the? reasons for the slide in NG prices under $2.

NG prices may have suffered from reports that the Biden administration is set to prolong the LNG export moratorium by 9 to 12 months. Hearings are ongoing on Capitol Hill regarding the pause in LNG plant approvals. (FX Street)

Citibank has predicted Henry Hub prices may fall as low as $1.80/MMBtu and forecast that European TTF numbers may drop to the $8/MMBtu range. The lower targets are tied to weather that has been milder than normal in all three major markets--North America, Europe, and Asia. March spot TTF futures prices today are valued at $8.15. The bank forecast an average U.S. natural gas price of about $2.30/MMBtu in the first quarter and an average of $2.10/MMBTU in the second and third quarters. Citi also sees European prices averaging $8.50/MMBtu in the current quarter, before rising to $10/MMBtu sometime in the second quarter. Average prices in Asia should be about $1.50 to $2/MMBtu above those in Europe. Asian JKM futures for March delivery settled at $9.45 today on the CME platform. OPIS analysis adds : "? The $1.80/MMBtu target puts natural gas near a level where production in some plays, notably the Haynesville shale, could become uneconomical."

NG has broken the key lows from last April at 1.944-1.946 this morning with a current low of 1.929.If those lows were to be broken, next support is seen at 1.852-1.860 and then at 1.808-1.815 from values seen in the third quarter of 2020. Momentum is neutral at an oversold level. Resistance lies at 2.040-2.046 and then at 2.100-2.102. A settlement back over $2.04 would be suggestive of a near term bottom in place, in our opinion.