Energy Market Update 9-5-2023

Crude is up $1.45?? RB is up 4.28 cents??? ULSD is up 9.50 cents

Overview

Crude oil has rallied on the opening of the NY session as the Saudis have said that they would extend their supply cut for 3 months, until the end of the year. The crude oil is making a fresh high since mid-November of last year.

Crude oil was lower overnight as Chinese and European PMI data disappointed. Products are higher, led by Gasoil and ULSD, as stocks of distillates are seen as tight.

ARA Gasoil and diesel supplies were at a 6 month low as of the end of August, as per Quantum Commodities reporting last week.

Caixin's private Chinese services sector PMI, issued last night, fell in August to its slowest pace in 6 months, reinforcing concerns over Chinese demand. The reading was 51.8, down from July's level of 54.1. Caixin's Composite PMI of services and manufacturing fell to 51.7 in August from 51.9 in July. It was the weakest reading since January. The 12 month business confidence outlook survey fell to a 9 month low. (Reuters)

The Eurozone PMI issued today fell faster than originally thought. The August reading fell to 46.7 from July's level of 48.6. The preliminary estimate for August was 47.0. The August reading was the lowest since November 2020. (Reuters) The Euro sank to a 3 month low versus the dollar, while the Bloomberg dollar index rose to a 5 month high. The dollar may have also been supported by news that Goldman Sachs dialed back their odds of a recession in the U.S. to 15% from 20%. They cite wage growth and the belief that due to cooling inflation the Fed may not need to raise rates any further. (Bloomberg)

The Commitment of Traders Report for the week ended Tuesday August 29th showed WTI net length in futures and options held by money managers on ICE/CME combined rose by a total of 19,040 contracts --with the CME adding 25,773 of net length, but ICE shedding 6,733 contracts --The CME rise was a function of longs added and shorts reduced. The WTI length added was offset by Brent futures net length held by money managers falling 20,754 contracts --with longs reduced and shorts added. ICE Gasoil futures saw money managers shed 572 contracts of net length --by adding a few more shorts than longs. ULSD net length in futures and options held by money managers fell by 925 contracts as more longs were sold than shorts. RB net length held by money managers fell by 4,788 contracts as longs were sold and shorts were added.

Technicals

WTI and RB have mean reversion setups. WTI settled over the DC bollinger band, while RB settled under its DC band.

WTI resistance at 87.12-87.22 from data from last August/September has been pierced. Today's high is 87.38. Above this resistance is seen at 88.41-88.42.? Support lies down at 86.06 and then at 85.02. The upper bollinger band comes in at 86.20. Momentum is positive.

RB spot futures see support at 2.6045-2.6057. The lower DC bollinger intersects at about 2.5910. Resistance is seen at 2.6788-2.6799. DC chart based momentum is low here, but still negative.

ULSD October futures have support at 3.1471-3.1482 and resistance at 3.2150-3.2175 and then at 3.2310. Momentum is trying to stay negative here.

Natural Gas--NG is down 17.8 cents

NG is down as the weather forecast for the U.S. lost cooling demand in the 2nd half of this month. As an example for a cool down in temperatures, Dallas, a major gas-consuming city, is likely to see a record-breaking high of 107 degrees this Friday, but could see highs quickly drop into the 80s by next week, says The Weather Channel.

In Australia, the union workers have threatened 2 weeks of 24 hour rolling work stoppages at Chevron's 2 major LNG export plants. A partial stoppage is set to begin September 7th, followed by a full stoppage beginning September 14th. But, Chevron has yet to cancel or delay any LNG shipments. (Bloomberg)

October TTF prices have fallen to their lowest value since July 31. The low today is Euro 31.995/ Mwh, which equates to $9.38/MMbtu. TTF prices have eased as storage is more than ample, even as weather is getting hot in Europe. (Montelnews)

The Baker Hughes NG rig count seen Friday showed a drop of 1 unit, taking the total to its lowest level since January of 2022. (Zacks.com)

In NG futures and options on the CME money managers added to their net short position by 17,208 contracts --bringing their net total short position to 35,241 contracts as of Tuesday August 29th.

Technically, while NG has positive momentum on the DC chart, price action looks less supportive. There is a gap from the weekend from 2.708 to 2.735. The rollover gap down to 2.599 from the September expiration has been filled this morning. Support below is seen at 2.564-2.571 and then at 2.524-2.531. Resistance is seen at 2.692-2.701.

Disclaimer

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