Energy Market Update 9-25-2023

Due to technical difficulties, there are no charts attached for today's report.

Overview

RB & Crude oil are near unchanged, while ULSD is a bit higher, but Gasoil is lower. Prices rallied overnight on the Russian fuel export ban announced last week.

?

Distillate prices fell considerably Friday as the market believes that the Russian ban will last weeks, not months. We read several comments regarding the ban.? "Russia has limited storage capacity to accumulate supplies and will not want to miss out on strong margins globally," oil analysts at S&P Global said in a note. Russian refinery maintenance is precipitating the ban as domestic supplies dwindle. The primary oil refining capacity that will be offline in Russia is set to soar by 44% in September compared to August amid seasonal maintenance, according to Reuters estimates based on data from industry sources. More refineries are expected to return to operations in October when many facilities will have completed the maintenance works. Also, as a Fortune magazine headline reads : "Putin’s war machine risks running out of fuel, so Russia is banning the export of gasoline and diesel." In the weeks leading up to Thursday’s intervention, analysts said Russian diesel exports had come under pressure due to the weakness of the ruble, domestic refinery maintenance and government-led efforts to increase domestic supply. (CNBC)

?

Offline refinery capacity was expected to reach 1.4 MMBPD this week according to IIR Energy versus 800 MBPD offline last week. (Reuters) This highlights the normal maintenance that is done in the fall.

?

Nigeria expects to lift oil production to 2.1 MMBPD by the end of next year after oil companies operating in the country committed investments of $13.5 billion in the short term, the presidency said on Saturday. Oil production stood at 1.41 MMBPD in August, up 8%from July, data from the petroleum regulator shows. (Refinitiv)

?

The Baker Hughes oil rig count fell by 8 units to a total of 507, which is the lowest total since February 4, 2022. (Oil Price)

?

CFTC data showed money managers raised their net length in WTI futures/options in the week ended Tuesday September 19. Net length rose by 17,227 contracts on ICE/CME combined. This raised their total to its highest since February 2022, as per Bloomberg reporting. RB net length fell by 6,236 contracts, while ULSD length rose by 1,491 contracts.

?

The upcoming Golden Week holiday is expected to see a sharp rise in air traffic. 21 million passengers are expected to take to the skies during the 8 day holiday period. This follows record air travel demand seen in July and August this year. (Bloomberg) China's manufacturing sector is expected to return to expansion in September, with the purchasing manufacturing index forecast to rise above 50 for the first time since March, Goldman Sachs analysts said. In a positive sign, China's oil demand increased 0.3 MMBPD to 16.3 MMBPD last week, partly due to a gradual recovery in jet fuel demand for international flights, Goldman added. (Reuters)

?

Shares of the ailing China Evergrande plunged 21.8% after the developer said it was unable to issue new debt due to an ongoing investigation into one of its subsidiaries, dealing a fresh blow to its restructuring plans. (Reuters)

?

On Wall ST, the S&P500 hit its lowest in three months on Friday and futures are back in the red again on Monday. A government shutdown still looms in the U.S. The auto workers have widened their work slowdown as their strike is ongoing. Ford says 'significant gaps' remain in UAW labor contract talks. (Reuters)

?

?

?

Technicals

Momentum are negative. Spot Gasoil futures were repelled from 1,000 again Friday.

?

WTI spot futures have resistance at 91.33-91.36 and support at 88.92-88.97.

?

Natural Gas

NG is down slightly as shoulder season demand outweighs the support derived from crude oil and TTF strength, as well as the rig count drop.?

?

The NG rig count fell by 3 units in Friday's report. In the Haynesville shale in Arkansas, Louisiana and Texas, drillers cut the number of gas rigs operating by two to 39, the lowest since November 2020. (Reuters)

?

Demand this week will fall to 94.0 BCF/d, from last week's 95.0 BCF/d, before demand rises next week to 95.5 BCF/d, when the weather warms again and exports increase, as per LSEG data.

?

TTF prices have risen today to their best value in a month for the spot October futures. Russia's fuel export ban revived concerns over Russia’s broader energy supplies, as per Bloomberg reporting. There have been no reports that gas exports could be impacted, but some traders consider the new ban as a sign that Russian risks are back in focus. Prices last week rose on the back of supply concerns from Norway, as it was slow to exit field maintenance and the drop in U S feed gas seen at Chenier's Sabine facility.

?

Money managers raised their net short position in NG futures/options by 5,662 contracts as the drop in long positions exceeded that seen in short positions. They both dropped quite a bit. The net short position rose to 32,811 contracts.

?

The October NG/LN options contracts expire tomorrow. The $2.50 and $2.75 strikes have open interest on the CME of over 43,000 and 34,000 contracts respectively, which may act as a magnet for futures settlements tomorrow.?

?

Technically, November NG futures have positive momentum.? Support lies at last week's double bottom at 2.832-2.834. Resistance lies at 2.973-2.976.

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