Daily Energy Market Update 12-18-2024

February Crude is up 51 cents    February RB is up 1.82 cents     February ULSD is up 2.50 cents

Overview

Energies are higher as a Fed rate cut is expected today. Also supportive is the recent spate of sanctions by the EU & U.K. levied against Russian shipping. Also helping is a strong draw in crude supplies seen in last night's API data.

API                Forecast        Actual

Crude Oil     -1.5/-1.8         -4.69

Gasoline      +1.0/+2.1       +2.45

Distillate      +0.2/+1.0       +0.744

Cushing           n/av             +0.8

Runs            -0.7/+0.3%      n/av   

Markets are pricing in a roughly 97% chance the Fed cuts interest rates by 25 basis points today, per the CME FedWatch Tool. Given the expected rate cut, markets seem more focused on seeing what the future path for rates might be in Fed comments to be offered today.

In addition to the EU sanctions announced Monday adding an additional 33 vessels from Russia's shadow fleet used for transporting crude or petroleum products,  Britain also sanctioned 20 ships for carrying illicit Russian oil. (Reuters)

As for gasoline, trade data shows that Chinese exports rose 42% YoY to 1.26 million metric tons last month, the highest monthly shipments since August 2023. A sudden jump in shipments could be mainly attributed to the plants rushing to ship before the reduction of a tax rebate from 13% to 9%. The rebate reduction would cut export margins by 200-300 yuan ($27.51-$41.27) per ton, a state oil official said.  As a result, gasoline exports are expected to decline in December compared with November.  But, November diesel exports fell by 65.9% YoY. (ING/Reuters)

Reuters has an article describing OPEC's wariness of a renewed US oil output rise under Trump, which would eat into OPEC+'s market share. Yet, "I think a return of Trump is good news for the oil industry, with possibly less stringent environmental policies," a delegate from a U.S. ally OPEC+ member said. "But we may see higher production in the United States, which is not good for us.", the source added. Some industry executives and analysts aren't convinced that U.S. supply could increase substantially under Trump. Shale producers are focused on their economics, known as capital discipline, and are expected to only increase output if it will be profitable, according to the head of Exxon's upstream division. Also, new oilfields take years to develop, so Trump's pledges for permits to drill in new places aren't likely to yield new barrels any time soon.

Technicals

Technically the February daily charts for the energies are showing inside trading days today. The ULSD and WTI are testing the 100 day moving averages on the February daily charts.

In February WTI,  the 100 day moving average lies at 69.92. Chart based resistance comes in at 70.94-71.02 and then at 71.89-71.97. Support is seen at 2 of the past 6 lows at 68.74-68.81.

February ULSD sees the 100 day moving average intersecting today at 2.2617. Resistance lies at 2.2779-2.2793 and then at 2.2934-2.2949. Support for February is seen at 2.2254-2.2262.

February RB has its 100 day moving average intersecting today at 1.9870. Resistance on the chart lies at 2.0083-2.0091. Support comes in at 1.9440-1.9444.

Technicals

Technically the February daily charts for the energies are showing inside trading days today. The ULSD and WTI are testing the 100 day moving averages on the February daily charts.

In February WTI,  the 100 day moving average lies at 69.92. Chart based resistance comes in at 70.94-71.02 and then at 71.89-71.97. Support is seen at 2 of the past 6 lows at 68.74-68.81.

February ULSD sees the 100 day moving average intersecting today at 2.2617. Resistance lies at 2.2779-2.2793 and then at 2.2934-2.2949. Support for February is seen at 2.2254-2.2262.

February RB has its 100 day moving average intersecting today at 1.9870. Resistance on the chart lies at 2.0083-2.0091. Support comes in at 1.9440-1.9444.

Natural Gas--NG is up 9.0 cents

NG prices are higher this morning continuing the rally started yesterday afternoon as weather forecasts turned colder and strong LNG demand supports. Commentary seen suggested the rally was due to "dip buying" and "short covering".

Tuesday saw both the 12z GFS and ECMWF ENS models trend colder for the Dec 26-31 period. GWDDs are still below-average during the period, but the forecast change seemed to trigger some short covering, news reports say. There is also optimism that the early-January pattern will flip colder across the East, as per Celsius Energy commentary. NGI adds that there are worries  of January freeze risks.

A highly anticipated Department of Energy study released Tuesday found that big increases in LNG exports would cause U.S. prices to spike — but it didn’t deliver a knockout blow to LNG supporters awaiting President-elect Donald Trump’s return to the White House. The report didn’t directly call for a hard limit on U.S. LNG exports. The report suggested that energy costs for U.S. consumers will rise if LNG exports are "unconstrained". The new study suggested that by 2050 U.S. LNG exports could increase domestic prices more than 30 percent. That assumes export volumes of more than 56 BCF/d — more than four times current export levels. S&P research sees this high export volume as unrealistic. S&P Global published a separate study Tuesday that predicts 29 BCF/d in 2040, at which point gas prices would rise only 3 percent on the wholesale market and 1 percent for households above 2025 levels. The report also spoke of the environmental issues of greater greenhouse emissions associated with higher LNG exports. The DOE’s new report is likely to provide fodder for legal challenges to LNG projects in the future. (E&E News by Politico/Reuters)

LSEG forecast average gas demand in the Lower 48, including exports, would rise from 124.0 BCF/d this week to 129.1 BCF/d next week. The forecast for this week's demand is up 1.0 BCF/d from that seen 1 week ago.

Early estimates for this week's EIA gas storage data are calling for a draw of 119 to 124 BCF. This compares to last year's draw of 78 BCF and the 5 year average draw of 92 BCF.

TTF prices rallied Tuesday afternoon following the comments from the European Union that it has no interest in continued gas flows from Russia via Ukraine. The EU reaffirmed that it is prepared for the expiry of the transit deal between Ukraine and Russia by year-end.  (ING)

Technically, the NG price action in the past week shows that there have been 2 dips below 3.100 that have held. Upside recent resistance lies in the low to mid-$3.50 area. In the near term, support is seen at 3.281-3.282. Resistance comes in at 3.435-3.437 and then at 3.489-3.494. The January daily contract is showing the 100 day moving average lying at 3.322 today. Comments heard today point to continued volatility in NG prices.

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