Energy Market Update 9-11-2023

Crude is down 26 cents    RB is up 1.68 cents   ULSD is up 5.18 cents

Overview

Crude oil is lower on what is seen as profit taking and a seasonal demand slowdown, while diesel prices have risen to their best value since January. The distillate strength is likely due to the continued perception of tight supply, which is being exacerbated by the LNG strike ongoing in Australia. Refinery maintenance is seen ongoing in September and October, which is likely supporting the distillates today, besides concerns over LNG supply tightening due to the strike in Australia.

Refinery maintenance will lower crude demand by 2 million to 2.5 MMBPD in September and October, but it will rebound in November and December, partially offsetting the price effects of the cuts,” as per Rsytad Energy analysis, estimating that refinery outages will peak at 10 MMBPD in October. (Reuters) WSJ commentary adds the following re this week's petroleum stats : " some analysts say this week's report, due Wednesday, may see crude imports rise, exports fall, and refinery activity slow, all of which could mark a seasonal shift toward a bearish increase in supplies".

Libya has shut four oil ports as a precautionary measure while state-owned National Oil Corp. declared a state of maximum alert on Sept. 10, before a possible hurricane headed for the country. The 4 ports will be shut for at least three days. (Platts) The 4 ports have a capacity of 630 MBPD.

The euro zone is forecast to grow more slowly than previously expected in 2023 and 2024, the European Commission said on Monday, held back by a sluggish German economy. It is now projecting GDP growth of 0.8% this year for the zone's five largest economies, down from the 1.1% forecast in May. (Reuters)

CFTC data showed money managers added a lot of net length in WTI futures/options in the week ended Tuesday September 5. WTI net length on ICE/CME rose by 72,159 contracts with a large amount of new longs added on the CME. Money managers are most bullish on US oil since June 2022. (Bloomberg)  RB net length fell by 3,187 contracts. ULSD net length fell by 737 contracts. .. Since last Tuesday, WTI futures open interest on the CME has risen by a further 67,000 contracts. We suspect that much of this is further new length. This length is in the face of the report seen Friday that the world's largest oil ETF had seen an outflow of 1/2 billion dollars on Tuesday. The Wisdom Tree Brent crude oil fund has $1.8 billion in assets. (Bloomberg)

OPEC+ crude oil output grew by 120 MBPD in August as increases in Iran, Iraq and Nigeria more than offset further reductions by Saudi Arabia and Russia, according to the latest Platts survey by S&P Global Commodity Insights, seen late last week. OPEC+ production averaged 40.52 MMBPD in the month. The OPEC+ alliance collectively continues to produce significantly below its quotas, with the total shortfall 1.1 MMBPD in August, according to the survey.

The Baker Hughes oil rig count was up 1 in Friday's report.

There are a host of economic and monthly reports due this week. OPEC releases its monthly report tomorrow (Tuesday). The IEA monthly report is due Wednesday. The U.S. CPI number is due Wednesday. The ECB is set to announce its rate decision Thursday.  The European Central Bank will hold interest rates steady on Sept 14, according to a majority of economists polled by Reuters, but just under half expect one more rise this year to bring down inflation. (Reuters)

Technicals

Gasoil and ULSD spot futures have risen to their best value since late January. Momentum looks to be turning negative for the crude.

ULSD is testing its upper bollinger band on the DC chart. That value lies at the 3.3300 area. Resistance is seen at 3.3560-70 and then at 3.3875-80 via DC chart data from December 2022. Support comes in at 3.2925-35 via the 60 minute October chart. The overnight low is 3.2667. Momentum is positive.

Rb is having an inside day versus Friday's range. Momentum is positive. Resistance lies at Friday's high at 2.7049. Support comes in at 2.6171-2.6191.

WTI spot futures see support at 85.93-86.00 and resistance at the double top seen last week at 88.07-88.08.

Natural Gas-NG is down 1.4 cents

NG is a little lower as temperatures in the U.S. are turning cooler, lowering demand. Dallas,TX temperatures hit a record high 110 Friday, but today's highs will be in the mid-80s and highs are seen in the 70s Wednesday and Thursday, according to The Weather Channel, which should curb cooling demand considerably, as per WSJ commentary. Also causing some selling of the commodity is a statement from Gulf South Pipeline, which sends feedgas to the Freeport LNG facility, that reports a "customer's failure to take confirmed quantities" to Freeport. (WSJ)

TTF prices are up on the back of the strike in Australia, and Norway having problems exiting some maintenance projects. Norway’s largest gas field is entering its third week of works and will face more capacity restrictions than initially expected. (Bloomberg) European storage is seen as 94% full. Bloomberg research sees end of season storage at 44% for the region encompassing NW Europe, Italy and Austria. Expectations for a warm September and mild October in the Northwestern part of Europe mean the start of the heating season isn’t yet on the horizon. (Bloomberg)

In Australia, Chevron Corp started withdrawing contractor workers from its Gorgon LNG facility on Saturday, shortly after staff went on strike at two major projects. This occurred after the strike that started Friday. No further talks were scheduled between the unions and Chevron. (Reuters) On Thursday, full walkouts are set to begin if no agreement is reached, according to the unions. More than 68% of capacity is contracted to buyers in the region, and actual exports to Northeast Asia account for more than 80%, as per Rsytad Energy analysis. (Bloomberg)  Chevron Australia no longer expects to reach a deal with unions and will instead pursue an untested legal strategy. Chevron will apply to Australia's industrial umpire, the Fair Work Commission, for an "intractable bargaining" declaration, which, if granted, would end strikes and allow the umpire to dictate an agreement. (Reuters) A number of LNG buyers in Asia said they expect to see limited supply impact in the first few weeks of a strike, but a bigger knock could be felt should strikes last longer. There will be limited impact of the strikes in the short term as inventory is high in Asia. In 2022, around 46% of Gorgon and Wheatstone's LNG exports were sent to Japan, followed by 15% each to China and South Korea and around 14.4% to Taiwan. The remainder went to Singapore, Thailand and India. (Platts)

After months of low wind speeds in several key wind farm areas, U.S. wind power generation hit its highest levels in nearly five months in early September as wind speeds picked up. Wind speeds typically near their highest for the year in the fall and winter. The key factor behind the below-average wind speeds in 2023 has been the El Nino weather pattern that has led to a slowing in the trade winds across the United States. (Reuters)

The U.S. solar industry expects to add a record 32 gigawatts (GW) of production capacity this year, up 53% on new capacity in 2022 and helped by investment incentives under the Inflation Reduction Act, a report published on Thursday showed. (Reuters) The NG rig count from Baker Hughes fell 1 unit in Friday's report.

CFTC data issued Friday showed money managers covered some of their net short position in the week ended Tuesday September 5th. Their net short position fell by 3,419 contracts to a total of 31,823 contracts.

Technically NG still has negative momentum. Support at 2.539-2.544 was tested overnight with a low of 2.541. Below that support lies at the double bottom from last week at 2.500-2.503. Resistance lies above at 2.659-2.660 and then at the bottom of the gap at 2.708.

Disclaimer

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