Energy Market Update 9-29-2023

Crude is up 81 cents November RB is down 98 points November ULSD is up 7.26 cents

Overview

Crude oil is up today as the quarter ends with the overriding narrative of tight supply driving prices. Reuters adds prices are being supported by expectations of a demand uptick as China begins its Golden Week holiday. ULSD is leading the uptick today as fuel exports from Russia and China are not seen rising. RB is lower as demand remains soft as driving season has ended.

India's September oil imports "rebounded" from August's 7 month low figure. September Indian crude oil imports from Russia were seen at a rate of 1.8 MMBPD, making them the highest from any supplier. These imports are seen rising to 2.0 MMBPD by the end of October as refiner maintenance ends. Russian Urals crude has become more attractive due to the Russian fuel export ban. The Urals grade of crude is good for diesel yield, which makes up 40% of India's fuel consumption. India is said to be paying $80 for Russian crude, which is $20 over the G7 cap. The discount though for the Russian crude to Dated Brent is said to be $4-5, narrower than the $6-7 discount that was seen 2 weeks ago. These prices refer to October loadings. September imports out of Iraq rose while those from Saudi Arabia fell as Iraqi crude is at a $2 discount to the Saudi crude. (Reuters)

Surveys from WSJ and Reuters see prices remaining elevated the remainder of this year and into 2024. The Reuters survey of 42 analysts and economists sees Brent prices averaging $84.09 in 2023, up from last month's survey of $82.45. In 2024 prices are seen averaging $86.45. WTI prices in 2023, as per the Reuters survey, are to average $79.64, up from August's estimate of $77.83. In 2024, WTI is forecast to average $82.99. WSJ's survey sees Brent averaging $89.28 and WTI $85.33 the rest of this year. The following comments were seen from the Reuters survey: ""Supply cuts will probably be extended into 2024 as neither country wants prices to fall while they are grappling with higher government expenditures." "Some analysts expect production increases through U.S. shale to help offset the OPEC+ supply cuts, albeit only marginally. Rising output from Iran and Venezuela is also seen helping."

Diesel prices have been helped the past 24 hours as Russia's Energy Minister said they are not ending their fuel product export ban soon. Diesel was also helped by news that the Chinese government will not issue new quotas for clean oil product exports and additional allowances for crude oil imports this year. (Platts)

Today's U.S. Core Personal Consumption Expenditure Price index (PCE) for August rose 3.9% year on year, right in line with forecasts. August's reading was down from 4.2% in July and moving closer to policymakers' 2% inflation target. The PCE index is one the Fed is keen on to help them make interest rate decisions. One news wire asks : Will the lower PCE index signal the end of Fed rate hikes?

October RB & ULSD and the November Brent futures expire today.

Technicals

Product momentum on the November charts seems poised to turn positive. Crude oil momentums look neutral.

November ULSD has a stepladder up look over the past 4 sessions on the November daily chart. Resistance at 3.3450-3.3462 has been tested today with a high 3.3564. Above this we see resistance at 3.3893. Support lies at 3.2654-3.2672, which is just below the overnight low of 3.2694.

RB for November sees support at 3.4419-3.4449, which was tested with an overnight low of 2.4435. Below that support lies at 2.4233-2.4259. Resistance comes in at 2.5065-2.5074.

Spot WTI futures has support at 91.33-91.39. resistance lies at 93.74 and 94.17, with the upper DC bollinger intersecting at 93.65.

Notable is the double bottom on the December Brent chart from yesterday/today at 92.74-92.75. Resistance lies above at recent highs at 94.80 and 95.35.

Natural Gas--NG is down 8.3 cents

NG is lower now after rallying overnight to very near $3. Shoulder season demand is not seen enough to propel spot futures over $3. Shoulder season demand is reflected clearly in the news that East Coast U.S. cash traded below $ 1 Thursday, as per NGI reporting. NGI's headline today is " Fall Forecasts ‘Not Cold Enough’ for Bulls".

Thursday's EIA NG storage data came in a bit bearish with a build of 90 BCF, as milder temperatures allowed for more gas to be injected versus prior weeks. This week's number was the first in 12 weeks to show a build bigger than the 5 year surplus. The next 4 weeks' numbers though are seen shrinking the surplus; Celsius Energy forecasts the surplus to the 5 year average to shrink by 87 BCF over the next 4 weeks.

TTF prices have fallen today as Norwegian pipeline supplies picked up after some maintenance outages ended. Added to the weakness today is a slightly warmer forecast for the second week of October overnight. (Reuters) November TTF futures are now the spot contract with negative momentum. Over the past month, November TTF has seen prices between 41.30 Euros/Mwh and 48 Euros. We see resistance below that at the 45.50 area. Support below lies at the 40 Euro area.

Technically NG futures have positive momentum, but momentum looks to be cresting. Resistance lies above at the overnight high at 2.997-2.998. Support lies at 2.833-2.834 and then at 2.793-2.796.

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