Energy Market Update 11-15-2023

Crude is down 75 cents     RB is down 3.87 cents   ULSD is down 1.38 cents

Overview

Energies are lower with news wires touting concerns over fundamentals outweighing the gains seen yesterday on the back of a weaker U.S. dollar and the decent demand picture painted this week by the IEA and OPEC.

Data from China showed retail sales and industrial production beating expectations, but the underlying tone is still one of caution. "China’s mixed economic data in October pointed to an uneven and precarious recovery", reads a quote from the South China Morning Post. Retail sales rose by 7.6 % in October, year on year, above the 7% growth forecast by a Reuters poll. Industrial production rose by 4.6% year-on-year in October, faster than the 4.4% pace predicted by the Reuters poll. But, "Officials conceded ‘the foundation of the economic recovery still needs to be consolidated, with policies set to remain supportive to aid the recovery."

API                Forecast         Actual

Crude Oil      +0.8/+1.8      +1.335

Gasoline       +0.1/+0.6        +0.2

Distillate        -0.8/-1.2        -1.022

Cushing          +2.62          +1.136

Runs            +0.1/+0.6%      n/av

Chinese crude imports rose in October by 13.5% from a year ago. They totaled 11.53 MMBPD. But, refinery runs in China were dialed back in October from September's record amount. Runs in October ran at an average of 15.05 MMBPD versus September's 15.48 MMBPD. Runs were cut in the second half of October due to weakening margins and winter maintenance. Teapot refiners cut runs a lot as some are running out of crude import quotas. Private "teapot" refiners in Shandong province have faced particular pressure on their margins due to competition for limited Russian oil supply and higher prices for Venezuelan shipments following a U.S. sanctions relief.(Refinitiv) 

Reuters reports that the European diesel supply as of end of October stood at 12 MMBBL / -3% below the prior ten-year seasonal average at the end of October, but the deficit has narrowed sharply from -35 million barrels /-8% at the end of August. The deficit at the end of October was the smallest since January and February of this year.

The December WTI options (LO contract) expire today. Close of business Monday, the total open interest in the $80 strike was near 43,000 contracts. This is the strike with the most open interest near current futures pricing.  No other nearby strikes have any significant open interest. 

U.S. oil pipeline and export terminal operators are stepping up quality checks after finding an out-of-specification cargo that raised worries of excess metals contaminating Texas shale oil, operators and sources said. Concerns that contaminated oil could damage refining units and the oil's reputation spurred more routine testing, people familiar with the matter said. Platts testing has found only one out-of-specification cargo among this year's 54 trades, a spokesperson said. (Reuters)

Technicals

Momentum remains positive for the energies.

WTI spot futures see resistance at yesterday's high at 79.77. Support comes in at 77.09-77.16 and then at 76.15-76.21.

ULSD support in December futures is seen at 2.7685-2.7700 via the 60 minute chart. Resistance lies at the 2.8840 area.

December RB futures support at 2.1822-2.1836 has been tested this morning with a low of 2.1797. Next support is then at 2.1537-2.1550. Resistance comes in at the 2.25 area.

Natural Gas--NG is up 10.2 cents for December

NG prices are higher as demand in the U.S. bottoms out the next day or so. One analyst remarked that the market is "cautiously optimistic".

The EU will need to have a "big buffer" of gas in storage at the end of the current winter to help prepare for the following winter, a senior European Commission official said Nov. 14. The official added that the EC was already preparing for winter 2024-2025. She said that the EU had reduced gas demand by 18% compared with the average of the past five years. Prices are now lower thanks to healthy storage levels and demand curtailments, but remain historically high, as per Platts commentary.

TTF Prices have forged support at the 44.50 Euro area over the past week. Bloomberg's headline today re the European gas market reads: "European Gas Prices Edge Higher as Winter Risks Shift Into Focus." The article adds concerns over potential supply disruptions. The rally today comes even as unseasonably mild weather is expected across much of western Europe well into late November and storage remains above 99% of capacity.

The EIA said in a report Monday that N. American LNG export capacity will more than double thru 2027. The capacity will expand to 24.3 BCF/d from 11.4 BCF/d today as Mexico and Canada place their first LNG export terminals into service. The U.S. will add 9.7 BCF of that increase in export capacity. (EIA.gov)

Technically DC chart based momentum for NG looks poised to turn positive. Prices seem to have found support below 3.10. We see support at 3.061-3.070. Resistance lies at 3.258-3.264.

Disclaimer

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