Energy Market Update 9-6-2024

Crude is up 33 cents      RB is up 1.80 cents       ULSD is up 2 ticks

Overview

Crude prices are higher as OPEC+ announced a delay in bringing back production. OPEC+'s planned October hike was for 180,000 bpd.WSJ commentary re the OPEC+ decision reads as follows:

"The group of oil producing countries agreed to extend voluntary production cuts to the end of November, easing worries over a market surplus, but failed to address broader concerns over global demand. "Markets appear to be underwhelmed with the move," ING analysts say in a note to clients. "The issue is that the oil balance is in surplus over 2025, suggesting that prices are likely to remain under pressure without OPEC+ taking longer term action." Analysts at U.S. investment banking firm Jefferies said the OPEC+ decision has the effect of tightening fourth-quarter balances by about 100,000-200,000 barrels per day (bpd) and should be sufficient to prevent material builds even if demand from China does not improve. (Reuters) "The final agreement on a postponement of two months has so far only helped the oil price to a limited extent - after all, 'postponed is not canceled,' but it shows that OPEC+ is continuing its efforts to stabilize prices," said Commerzbank's commodity analyst.  "The move is unlikely to serve as a significant price accelerator, but "it may indeed undercut the bearish narrative that was gaining traction in a corner of the market that the group was set for a breakup," said the head of global commodity strategy at RBC Capital Markets.

The DOE data was supportive for crude oil and distillate, but perceived less so for gasoline, as after the DOE data RB fell to a fresh low for recent trading. U.S. crude oil inventories fell to their lowest since September 2023 as imports dropped, while gasoline stockpiles rose with the end of the summer driving season. Crude supplies fell by 6.87 MMBBL, mostly on the back of a drop in imports of 768 MBPD ( = 5.376 MMBBL). Gasoline supplies rose by 0.848 MMBBL. A draw of 1 MMBBL was forecast. Gasoline demand fell by 369 MBPD to 8.938 MMBPD, which beat 2022 demand of 8.727 MMBD, but was below last year's demand of 9.321 MMBPD. Distillate demand rose by 175 MBPD to 3.997 MMBPD, beating the prior 2 years' figures by 131 and 373 MBPD.

The Non Farm Payroll number issued this morning showed 142,000 new jobs were added, which was below the forecasts for +160.000 / +163,000. In addition, revisions to the prior 2 months' data shed 86,000 jobs. Energy prices made fresh highs for the day on the number release as the jobs data clearly suggests a Fed rate reduction is forthcoming. ""The longer-run trends in labor-market and inflation data justify the Federal Reserve easing interest-rate policy soon, and then steadily over the next year,"" Chicago Fed President Austan Goolsbee said Thursday in an exclusive interview with MarketWatch.

In Libya, exports remain mostly shut in but some loadings have been permitted from storage. Reuters said yesterday that production in Libya remains "curtailed'.

Retail gasoline and diesel prices have slipped further today. The AAA says today's national average for gasoline is $3.296, which is the lowest since February 28th. The EIA says that the weekly average retail diesel price as of 9/2 was $3.625, which as per their data was the lowest seen since the week of 01/03/2022.

Bank of America lowered its Brent price forecast for the second half of 2024 to $75 a barrel from almost $90 previously, it said in a note on Friday, citing building global inventories, weaker demand growth and OPEC+ spare production capacity. (Reuters)

Technicals

RB momentum on the DC chart is oversold and that for ULSD is getting near oversold. ULSD and the crude oils are showing possible floors as the past 3 sessions' lows are bunched near each other.

In WTI, October and November futures settled a few cents lower Thursday versus Wednesday's price, while the rest of the contracts on the CME ended in positive territory, with Cal 26 up over 40 cents. WTI has the past 3 sessions with lows of 68.82, 68.75,and today's 68.91. Below this support is seen at the December 2023 low of 67.71. Resistance lies at 7.007-7.011 and then at 70.77-70.82 via the October 60 minute chart.

RB spot futures have support at the Thursday low of 1.9141. resistance lies at the Thursday high of 1.9734.

ULSD for October sees support at the low seen this week of 2.1500. Resistance lies at 2.1917-2.1933 and then at 2.2090-2.2100 via data from the October 60 minute chart.  The past 3 sessions' lows on the ULSD DC chart lie between 2.1500 and 2.1544.

Natural Gas-NG is up 2.2 cents

NG is slightly higher today continuing the rally from yesterday on the back of the bullish EIA data.

The EIA storage number came in much better than forecast. The +13 BCF build beat all estimates we had seen, the lowest of which were +19/+20 BCF. Spot natural gas futures prices rallied 5 cents after the stats were released. Total storage rose to 3.347 TCF, which is +208 BCF / +6.62% versus last year's level and +323 BCF / +10.68% over the 5 year average. Last week’s build was smaller than normal for the 16th time in 17 weeks. (Reuters) The surplus was at the lowest since the week ended Feb. 2. (NGI) Celsius Energy analysis says that the EIA number found support from a tight supply/demand imbalance courtesy of lower production, coal-to-gas switching, weak wind generation, and higher LNG exports.

The EIA adds the following re storage : "The average rate of injections into storage is 22% lower than the five-year average so far in the refill season (April through October). If the rate of injections into storage matched the five-year average of 11.1 BCF/d for the remainder of the refill season, the total inventory would be 4,035 BCF on October 31, which is 323 BCF higher than the five-year average of 3,712 BCF for that time of year." But ,as one analyst said the suggestion that storage will fill at the prior 5 year average of 11.1 BCF/d seems very unlikely given what has been seen this injection season so far, and thus an end of season (EOS) storage total over 4.0 TCF seems highly unlikely. The Desk's EOS survey is showing 3.905 TCF. The EIA in their STEO last month said the EOS would be 3.954 TCF.

Per today’s early-cycle data, LNG feedgas demand will rise to 13.6 BCF/d, up +0.5 BCF/d vs last year & the highest since March 11. The gains are at least partially due to cooler temperatures along the Gulf Coast, a seasonal trend that makes liquefaction more efficient, according to Celsius Energy.LSEG forecast average gas demand in the Lower 48, including exports, will fall from 102.5 BCF/d this week to 100.5 BCF/dd next week. That is down -0.9 BCF/d total from Tuesday's forecasts.

The EIA, in their Natural Gas Weekly Update, wrote : "Natural gas spot prices rose at all major pricing locations this report week (Wednesday, August 28, to Wednesday, September 4). Price increases ranged from 14 cents at FGT Citygate to $3.57 at the Waha Hub." "The price at the Waha Hub in West Texas, which is located near Permian Basin production activities, increased $3.57 from -$3.67/MMBtu last Wednesday to -$0.10/MMBtu yesterday/Wednesday. The Waha Hub price reached an intraweek low of -$6.41/MMBtu on August 29, its second-lowest price in inflation-adjusted dollars since 1995, ". The EIA wrote further : " According to data from S&P Global Commodity Insights, the average total supply of natural gas fell by 0.7% (0.7 Bcf/d) compared with the previous report week. "

Technically NG futures prices continue to have positive momentum as they approach the mid-August high of 2.301. Momentum is not yet overbought. Resistance above the 2.301 high lies at 2.343-2.350. Support comes in at 2.191-2.194 via the October 60 minute chart. Below that support is seen at 2.147-2.149. The 100 day moving average on the DC chart lies at 2.295.

Disclaimer

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