Energy Market Update 9-12-2023

Crude is up $1.12   RB is up 2 cents   ULSD is down 1 cent

Overview

Crude oil is higher as Libya is being hit by a hurricane that has shut in 1/2 of the nation's export capacity. As we noted yesterday, the shut in is set to last at least 3 days. The shut in began Saturday. (Reuters) The 4 terminals affected have a capacity of 630 MBPD. Supply tightness is a watchword seen in several market news accounts. Also aiding prices today is OPEC's monthly report.

OPEC issued its monthly report today. They kept their demand estimates for this year and next unchanged. Some had thought OPEC might reduce those estimates given the Saudi/Russian output cuts. OPEC raised their estimate for Non-OPEC supply for this year by 100 MBPD. They also reported that OPEC's output rose by 113 MBPD in August to 27.45 MMBPD. Demand for OPEC crude in 2023 was revised down by 100 MBPD from the previous month’s assessment to  29.2 MMBPD, which is around 800 MBPD higher than in 2022.  (OPEC.org)

The EIA's STEO will issued later in the day and then the IEA issues its monthly report tomorrow. In addition, the market is anticipating the U.S. CPI data due out tomorrow. The forecast is for August inflation to have risen by 0.6% for the month, up from July's pace of +0.2%. (Investing.com)

Saudi Arabia announced Monday that they will supply North Asian customers with full contract volumes in October. Saudi crude is seen as more expensive than other crudes, but the customers sometimes are bound by contractual agreement to take a certain amount of volume. (Reuters)

A Reuters analyst detailed how he believes that Chinese crude import strength seen in August ( crude import volume was 12.43 MMBPD) may be temporary, not a sign of a recovery there. He notes that August imports were likely bought as much as 3 months prior to arrival, when prices were lower. He mentions that China added 950 MBPD to its inventories on average in the first 6 months of this year. July saw refiners destock by 510 MBPD due to soft imports of 10.29 MMBPD. September imports may remain robust he says, but he questions whether imports from October on will remain strong, as those would have been subject to higher crude prices.

Technicals

Crude oils have forged new highs. ULSD has a mean reversion setup on the DC and October daily charts from Monday's settlement. October RB on its daily chart also has a mean reversion set up.

WTI spot futures has resistance at 88.65-88.68 and then at 90.36-90.39 from DC data from last fall. Support lies at 87.09-87.11 and then at 86.15. Momentum is neutral at a near overbought condition.

ULSD spot futures have resistance at yesterday's high at 3.4027. Support comes in at 3.3250-3.3270 and then at 3.2667-3.2681. Momentum is positive. The upper bollinger on the DC chart intersects at 3.3675. A settle below that level suggests further pullback. ...The September Gasoil futures expire today, currently having been rebuffed from a move over $1,000 seen yesterday and today.

RB spot futures have a stepladder up look. Resistance is seen at the filling of the DC gap at 2.7520. Support comes in at 2.6820-2.6835 and then at 2.6620-2.6630.  The daily October chart has its upper bollinger band intersecting at the 2.7175 area. A close below that level may lead to further pullbacks.

Natural Gas-NG is up 7.1 cents

NG is higher today, with WSJ commentary midday Monday suggesting that NG was boosted by the rally in the other energies. We note that HH next day cash prices rose to above 2.50 on Monday, thus supporting NG October futures valuation over 2.60. Also, news of China tendering for LNG cargoes is supportive, even as TTF prices are near unchanged. Today's WSJ commentary says NG may be supported by this week's EIA storage data, which is set to see the surplus shrink.

China's Sinopec has issued a tender seeking a total of 25 cargoes of LNG on a delivered ex-ship basis between October and the end of 2024. Sinopec is seeking the cargoes indexed to the Japan-Korea-Marker (JKM) benchmark for LNG. (Reuters)  While it isn’t clear if Unipec’s shipments are to meet domestic demand or for use in its trading portfolio, this is still the biggest push by a state-owned Chinese importer to procure LNG from the spot market since February. China’s LNG importers are booking more slots at import terminals, likely in an effort to build inventories ahead of the winter heating season, according to BloombergNEF. Still, there are more slots available at terminals than a year ago, reflecting the healthy inventory levels and sluggish economic growth that will weigh on gas demand. Chinese LNG demand this year has been sluggish. (Bloomberg)

TTF prices are near unchanged today even as the strike in Australia continues and news has Norwegian output with some maintenance issues. Maintenance work at Norway's  Troll field has been extended yet again, which is impacting around 125 mcm/day. This work is expected to go on until 13 September and then capacity will be brought back gradually in the coming days and weeks. Norwegian flows are currently around 135 mcm/day, down from around 330 mcm/day in mid-August. (ING) Platts reporting says Norwegian gas exports will remain low this week due to the maintenance at several key facilities.

In Australia, the commission set to hear the case between Chevron and the striking union has set September 22 as a hearing date. The union had wanted a date in November. The commission has declined to say how long it would take the tribunal to rule on the matter. (Reuters) The 10-hour stoppages to date have so far not impacted production, indicated government data. Industrial action is expected to escalate over the week including a rolling continuous strike scheduled for 14-29 September, which will almost certainly impact LNG exports, as per Quantum Commodities reporting. According to local media reports, the West Australian government is looking at options to at least defer the industrial action, although this could serve only to harden the resolve of unions.

In addition to comfortable European storage, key LNG buyers Japan and South Korea had more nuclear capacity available this winter compared to a year ago to help cover any winter demand surge, Rystad Energy analysis says. (Reuters)

Bloomberg details how NG demand in Europe has suffered. Despite an 80% decline from last year’s gas prices — which made some production unprofitable — Germany’s energy-intensive industry is struggling even more than the broader manufacturing sector. That’s especially true for chemicals. With European economies strained by higher interest rates, there are fears that some gas demand might never come back. Some of it might be due to companies switching to renewable power, but others are also pulling up and moving elsewhere.

Monday's reporting had the Freeport LNG facility taking in 0.622 BCF on the day. This was up from Sunday's volume of 0.28 BCF,  but below the Friday feed of 1.64 BCF. Energy Aspects believes that 2 trains might have been down at the Freeport facility. (Reuters/LSEG)

Technically, NG has momentum that looks poised to turn positive. There is still a gap overhead on the DC from 2.708 to 2.735. Those are our resistance points. Support is seen at the overnight low at 2.602-2.605 and then at 2.568-2.571.

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