Energy Market Update 9-3-2024

Energy Market Update 9-03-2024 

Crude is down $1.85          RB is down 6.72 cents       ULSD is down 4.17 cents     (the values here are versus Friday's settlement) 

Overview

Energy prices are lower versus Friday's settlement and lower than those seen 24 hours ago as European and Chinese manufacturing data point to demand concerns. These concerns are trumping the supply losses from Libyan production.

The latest blow for Europe came after German auto giant Volkswagen warned it was considering historic plant closures in a bid to save billion of euros, facing slower sales and higher energy costs. (Quantum Commodities) Europe’s efforts to compete with Chinese rivals and Tesla Inc. in electric cars are faltering. Car sales still nearly a fifth lower than pre-pandemic levels in Europe, as per Bloomberg reporting. 

On Monday, China reported new export orders fell for first time in eight months in July and that prices of new homes rose in August at their weakest pace this year. (Reuters) That comes after the official Chinese PMI data fell to a 6 month low.

OPEC oil output fell in August to its lowest since January, a Reuters survey found on Monday. The loss of Libyan supply is the main catalyst for the lower output, with its production down 290 MBPD. OPEC pumped 26.36 MMBPD last month, down 340 MBPD from July, the survey found. Yet, for August OPEC pumped about 220 MBPD more than the implied target for the nine members covered by supply cut agreements, with Iraq still accounting for the bulk of the excess, the survey found.

Gazprom Neft's Moscow Oil Refinery suspended operations at the plant's Euro+ refining unit following a fire caused by a purported large-scale Ukrainian drone attack on the region on Sept. 1, Reuters reported, citing its sources. Sources told Reuters that the Euro+ unit accounts for about 50 per cent of the plant's refining capacity. Sources also claimed that the unit may resume operations within five to six days, after repairs are completed. It was not immediately clear as to how much the reported damage to the plant will impact the refining capabilities. Prior statements from Russian authorities suggested "that there were no casualties and the functioning of the plant hadn't been affected." 

On Monday, crude prices were lifted off earlier lows after a suspected attack by Yemen's Houthi rebels targeted two vessels in the Red Sea on Monday, close to where crews are attempting to salvage a tanker loaded with oil that was attacked in August and still ablaze. (Reuters)

Prices were also helped Monday by news that The NOC had declared force majeure on supplies from its El Feel field, which typically produces 70-80 MBPD. According to Argus, Libya's production could have sunk to 300 MBPD this week, down more than 70% from July levels. (Quantum Commodities) In Libya, oil exports at major ports were halted on Monday.  NOC said on Thursday August 29 that total production had plunged to just over 591 MBPD by August 28 from nearly 959 MBPD on August 26. (Reuters)

Saudi OSP's are seen falling for Asian customers for October loadings when the prices are announced this week. The October Dubai cash/paper spread averaged a premium of 94 cents/b in August, down 66 cents/b from $1.60/b in July. This spread is key to the Saudis setting their OSPs. Thus, the OSP for the flagship A-light crude is seen being reduced by 40-70 cents. (Platts)

Friday's WTI open interest on the CME declined by over 36,000 contracts, led by what looks like long liquidation in October and November.

Retail U.S. gasoline prices continue to slip. Today's national average as per the AAA is $3.325, which is the lowest price seen since February 29th. One month ago the price was $3.478.

Technicals

Momentum remains negative for the energies. RB and WTI have fallen to fresh lows for the recent sell off on their respective DC charts.

RB spot futures has attacked the support at the contract low of 2.0298. Below that support lies at 2.0072 via the weekly chart. Resistance comes in at 2.0758-2.0781 and then at 2.0909-2.0913. The spot futures are trading well below the lower bollinger bands on the DC and weekly charts that intersect at 2.0964 and 2.0690 respectively.

WTI has broken support at 72.20. Next support lies at 71.58-71.67. Resistance comes in at the high of the session at 74.41-74.46. Some light resistance is seen below that even at 73.00 via the 60 minute chart. 

ULSD for October sees support at 2.2279 and then at 2.2162, which are recent lows on the DC chart.  Resistance comes in at 2.2774-2.2785 and then at 3 of the past 4 highs at 2.2948-2.2961.

Natural Gas- NG is up 1 cent

NG futures is near unchanged now having sold off over 6 cents over the past hour or so as weather demand will be weak in the coming 10 days with many US locations to see below average temperatures as fall season is starting. Spot futures prices were higher for the 2-day session since Sunday evening on the back of strong LNG feed gas demand, lower production, and even from some short covering, we believe.

Scheduled maintenance in Norway has ramped up, reducing supply to Europe. Daily Norwegian gas flows have fallen from close to 350mcm/day in early August to a little over 235mcm/day currently. These flows are likely to fall further with maintenance at Troll expected to start this week. While this maintenance is scheduled, the market is nervous about any potential overruns. Despite these lower flows from Norway, European gas storage continues to tick higher. Gas Infrastructure Europe data shows that storage is more than 92% full, above the 5-year average of 85% and largely in line with levels seen at the same stage last year. Platts states that the maintenance period will peak this week.

Technically  the spot TTF contract found support recently near Euro 36/Mwh. Below that support comes in near 34 Euro/ Mwh. Resistance lies at Euro 40 /Mwh and then at the spike high seen at 42.9 Euro/Mwh. 

Sea surface temperatures in the central-eastern Pacific are expected to cool further and La Niña conditions are predicted to form sometime between September and November and prevail through the winter of 2024/25, according to U.S. government forecasters. The result is likely to be a slightly colder than normal winter across the northern tier of U.S. states, a significant shift from last’s year’s record warmth. (Reuters)

Friday's NG open interest on the CME rose by about 12,500 contracts, which looks to be new shorts in November, December and January.  These positions are on top of the CFTC data seen Friday showing over 30,000 contracts of new net shorts added in the week ended Tuesday August 27.

Technically NG has positive momentum basis the DC chart. Support at 2.131-2.134 has been tested. Below support lies at 2.093-2.097. Resistance lies at the high of the double session at 2.200-2.202. Above that resistance lies at 2.276-2.278.

Disclaimer

This article and its contents are provided for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.

Commodity trading involves risks, and you should fully understand those risks prior to trading. Liquidity Energy LLC and its affiliates assume no liability for the use of any information contained herein. Neither the information nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Any opinions expressed herein are subject to change without notice, are that of the individual, and not necessarily the opinion of Liquidity Energy LLC