Energy Market Update 12-27-2023

Crude is down 30 cents    February RB is up 1.19 cents     February ULSD is up 69 points

Overview

""Oil prices (have) edged lower with trading muted through the festive period, with major shipping firms including Maersk and MSC returning to shipping routes through the Red Sea, despite the ongoing fighting in the Middle East."", as per WSJ reporting. One analyst cites some profit taking today after the strong rally seen Tuesday.Danish shipping firm Maersk, French firm CMA CGM and Greek firm MSC have all signaled intentions to resume some shipping in the Red Sea after the deployment of a multinational task force to the region. (Reuters)

Oil loadings at the Russian Black Sea port of Novorossiisk were suspended because of a storm on Wednesday, sources told Reuters. But crude exports from the Caspian Pipeline Consortium (CPC) terminal near the port have already resumed, Kazakhstan's energy ministry said.

The United States has finalized contracts to purchase 3 MMBBL of oil to help replenish the SPR after the largest sale in history last year, the U.S. Department of Energy said on Tuesday. The department said it bought the oil, for delivery to a site in Big Spring, Texas, for an average of $77.31 a barrel, below the average of $95 a barrel that oil sold for in 2022. The U.S has now purchased about 14 MMBBL for replenishment after last year's sales. About 4 MMBBL are also coming back to the SPR by February as oil companies return oil that had been loaned to them through a swap. (Reuters)

Today's down move in crude prices comes even as Chinese industrial profits registered a strong gain in November. Industrial profits extended gains for a fourth month. China's November industrial profits posted double-digit gains as overall manufacturing improved, although soft demand continued to constrain business growth expectations, emboldening calls for more macro policy support. In the first 11 months of 2023, industrial earnings shrank 4.4% from a year earlier, further narrowing from a 7.8% decline in January to October, National Bureau of Statistics data showed on Wednesday. Asia's biggest economy is widely expected to achieve the government's growth target of around 5% for this year. (Reuters)

The API data due out later today is forecast to show a draw of 2.6 MMBBL for crude oil, while the products are seen with builds. Gasoline supplies are seen rising by 0.4 MMBBL, while distillate supplies are seen rising by 1.0 MMBBL. Refinery runs are forecast to rise by 0.4%.

Technicals

The 50 day moving average has fallen below the 200 day moving average on the WTI DC chart. This "death cross is seen by many Wall Street chart watchers as marking the spot that a shorter-term pullback transforms into to a longer-term downtrend.", as per MarketWatch commentary.  They add that this is the first real 'death cross' since the pandemic plunge of early 2020 and they suggest that demand may be an issue leading to some weakness.

Momentum for the products on the February daily charts has turned negative. WTI DC based momentum remains positive.

February ULSD has a bit of a wall at the 2.7025 area, where 4 of the past 7 sessions highs lie. Support for the February ULSD comes in at 3 of the past 6 days' lows at 2.6269-2.6279. Below that support lies at 2.5838-2.5841.

February RB sees support at 2.1468-2.1480 and then at 2.1182-2.1196. Resistance lies at 2.2144-2.2160. The 200 day moving average for February RB lies below that at 2.2050.

WTI spot futures have support at 73.55-7360 and then at 72.63-72.75. Resistance lies at the high seen yesterday at 76.18.

Natural Gas--February NG is up 11 cents

NG is higher as weather forecasts show a colder pattern overnight, with one forecaster saying an impressive colder pattern will emerge after January 11.  Some short covering may also be in force ahead of the January futures expiration today.

January TTF prices in Europe have gapped higher today after being closed yesterday for an extended holiday period. The January TTF futures expire tomorrow. Platts reporting cites the Mideast tension for supporting the gas price, although a  bearish sentiment still remains across Northwest Europe and the Mediterranean they say. European storage stood at 87.08% full as of Dec. 25. Traders see improving demand signals from the West and East Mediterranean regions with expectations that demand in the Mediterranean will improve in January and February, according to Platts. Some position squaring ahead of year end may also be supporting prices, Platts adds. But, " demand is lower than expected this winter both in Europe and Northeast Asia partly due to a muted start to Asian winter weather, combined with reports that Chinese NOCs are re-exporting cargoes amid an apparent over-commitment on term volumes,", as per S&P Global analysis.

Early estimates for tomorrow's EIA storage data are calling for a draw of 73 to 79 BCF. This compares to last year's very strong draw of 195 BCF and the 5 year average draw of 123 BCF.

Technically NG has broken out of the range seen the past 3 weeks. The expiring January contract has risen over the DC chart's 200 day moving average that lies at 2.6130. February sees support at 2.410-2.411. Resistance lies at 2.555. Next best resistance on the daily chart comes in at 2.704-2.707. Momentum remains positive.

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