Energy Market Update 8-21-2024

Crude is up 57 cents      October RB is up 7 points       October ULSD is up 2.77 cents

Overview

Energies are mixed with news wire descriptions today being : "steady" and "catching its breath" when referring to crude prices. Crude is being supported by some dimming of prospects for a Gaza ceasefire. ULSD is up the most on better than expected API draw in distillate supplies.

API              Forecast       Actual

Crude Oil     -1.5/-3.0     +0.347

Gasoline      -0.9/-1.51     -1.043

Distillate     +0.3/-0.612    -2.247

Cushing        -0.293          -0.648

Runs          +0.1/+0.3%    n/av

Ceasefire talks continue to stumble along. While the US has given an upbeat assessment of progress so far, Israel and Hamas officials have poured cold water on prospects of an imminent deal. The main sticking point is Israel's insistence on retaining permanent control over two strategic corridors connecting Gaza to Egypt and Gaza to Israel. (Quantum Commodities) An analyst cited by Marketwatch said :"The bridging deal ( as the U S describes its proposal)  is still seen as one-sided by Hamas and while Israel reserves the right to attack after hostages are released, it is very premature to think that the conflict is in the first steps to resolution."

U.S. oil export gains should plateau in 2024 after years of strong growth, with domestic output expected to increase by the smallest amount since the pandemic at a time when global oil demand remains sluggish, as per a Reuters article. Crude oil exports from U.S. ports averaged about 4.2 million barrels per day so far this year, according to U.S. government data. That was up 3.5% from a year earlier, or the lowest percentage increase since 2015, when the U.S. exported its first cargo of domestic crude oil after a 40-year federal ban on export of domestic crude ended. In 2023, exports grew 13.5%. This year, U.S. oil production is set to grow just 2.3%, as shale producers remain focused on shareholder returns and limit new spending on production. The only major new market for U.S. crude has been Africa, as Nigeria's Dangote refinery snapped up barrels of WTI Midland crude after its start up early this year.

US job growth in the year through March was likely far less robust than initially estimated.  Goldman Sachs Group Inc. and Wells Fargo & Co. economists expect the government’s preliminary benchmark revisions on Wednesday to show payrolls growth in the year through March was at least 600,000 weaker than currently estimated — about 50,000 a month. This prospect further fuels the belief that the Fed has room to lower interest rates. Fed watchers are keying on Fed Chair Powell's remarks due Friday morning.  Once a year, the Bureau of Labor Statistics benchmarks the March payrolls level to a more accurate but less timely data source called the Quarterly Census of Employment and Wages.  (Bloomberg)

OPEC+ has limited scope to boost output as that would put pressure on oil prices, given increasing supply from the US, Brazil and Guyana, according to BP Plc Chief Economist Spencer Dale. (Bloomberg)

Technicals

Momentum remains negative for the energies.

Spot Gasoil futures have a mean reversion set up on the DC chart. The lower bollinger intersects today at 693.25. Support comes in below that at the Tuesday low of 687.25. Resistance lies at 717.50-718.00.

Spot WTI futures see support at the overnight low at 72.89-72.97 and then at 72.48-72.58. The lower DC chart bollinger at 72.74 lies in between the supports. Resistance comes in at 74.46-74.56 and then at 75.18-75.23.

October RB sees support at 2.0645. The lower bollinger lies right there at 2.0650. Resistance lies at 2.1109-2.1136.

October ULSD sees support at the lows of today/Monday at 2.2782-2.2795 and then at Tuesday's low of 2.2500. Resistance is seen at 2.3315-2.3320 via the 60 minute October chart and then at 2.3571-2.3588.

Natural Gas--NG is up 0.5 cents

NG spot futures are near unchanged, even as next day cash prices down 9 cents now versus this time yesterday.

Henry Hub next day cash is trading $2.10, versus September futures printing $2.180.

Yesterday's pullback off the highs looks to be due to long liquidation, seeing the large open interest drop of nearly 22,000 contracts for the September futures on the CME.

NGI commentary cites "skepticism for ballooning hot air" , while LSEG demand forecasts for the next 2 weeks were dialed back yesterday by 1.5 BCF/d versus Monday's forecast. This week's demand is seen at 103.7 BCF/d, rising next week to 104.3 BCF/d.

Parts of Texas today are under heat advisories with triple digit highs and heat indices higher than that. But, by the end of next week, temperatures are set to revert to near normal with highs back below 100 degrees. Texans set an unofficial record in electricity use Tuesday as soaring temperatures spurred homeowners, schools and businesses to crank up air conditioners. Power demand on the state grid rose to 85,559 megawatts at 6 p.m. local time, topping the August 2023 record of 85,508 megawatts, according to the Electric Reliability Council of Texas. (Bloomberg)

Natural gas production continues to hold between 101.0 BCF/d & 101.5 BCF/, including 101.1 BCF/d per Tuesday’s early data. down more than 2 BCF/d from the early August highs & off 1 to 2 BCF/d vs 2023 levels. This will  keep supply/demand imbalances tight, provided that gas prices remain cheap, is how Celsius Energy describes the production levels.

The EIA data due out tomorrow is seen as a build of 27 to 35 BCF. This compares favorably to the 5 year average build of 41 BCF, but is bigger than the +23 BCF build seen last year.

Technically DC chart momentum is negative. NGI describes prices as "rangebound". Support lies at 2.147-2.149 and then at 2.102-2.104. Resistance lies at yesterday's high at 2.276-2.278.

Disclaimer

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