Daily Energy Market Update 12-27-2024

Crude Oil is up 63 cents     February RB is up 1.31 cents     February ULSD is up 3.02 cents

Overview

Oil prices are up 1% today and are on track for a weekly gain, spurred by expectations of a stimulus-driven economic recovery in China, and by forecasts for a draw in crude supplies. Heightened Mideast tension may also be supporting prices.

The World Bank on Thursday raised its forecast for China’s economic growth in 2024 and 2025, reflecting the recent policy adjustments. It now expects China’s GDP to grow 4.9% in 2024 compared with its previous projection of 4.8%, while in 2025, China’s GDP is expected to expand by 4.5%, higher than the organization’s prior forecast of 4.1%. However, the World Bank cautioned that China’s embattled property sector, alongside subdued household and business confidence, will remain headwinds to its growth. (CNBC)

China’s industrial profits extended their decline to a fourth straight month, dropping 7.3% in November from a year earlier. However, the drop in profits was less than the declines in the previous months. They had slumped 10% year on year in October following a 27.1% plunge in September — their steepest drop since March 2020 according to Wind information. However, as per one analyst, “the worst is over” for China’s economy given the slate of stimulus push (CNBC)

The DOE's  petroleum data will be issued today at 1 PM. The WSJ survey is calling for Crude oil to draw by 1.1 MMBBL and Gasoline to draw by 0.8 MMBBL. Distillate supplies are seen building by 0.2 MMBBL. Reuters is calling for crude supplies to fall by 1.9 MMBBL. API statistics showed Crude Oil drew by 3.2 MMBBL, Distillates drew by 2.5 MMBBL, while Gasoline supplies built by 3.9 MMBBL. Worth noting is that the oil data today may see a large crude supply draw, which could be a function of efforts to avoid year end taxes in Harris County, where Houston is.

Yemen’s Houthi rebels claimed a drone attack on a Maersk container ship in the Arabian Sea on Dec. 27, stoking renewed concerns over Red Sea shipping amid another flare-up in attacks. The coordinated Houthi attack also involved a hypersonic missile attack strike on Israel’s Ben Gurion airport, Saree said, calling the incidents a response to Israeli airstrikes on Yemeni installations the previous day.(Platts)

China’s 33 qualified refineries are likely to win around 178.54 million mt (3.59 million b/d) of crude import quota to facilitate their crude delivery from Jan. 1, S&P Global Commodity Insights estimated based on various sources. The volume would increase by 1% from the 176.82 million mt (3.54 million b/d) in the same batch for 2024 issued in January. Similar to the allocation for 2024, Beijing is likely to issue the full-year crude import quota in the first batch, suggesting it is the “new-normal” to offer flexibility for local refiners to plan their feedstock procurement from the beginning of a year. (Platts)

Cash crude oil valuations in the Mideast rose further Friday. Traders continued to cite ongoing firm demand and a lack of available barrels as reasons behind the surge. Platts, part of S&P Global Commodity Insights, assessed February cash Dubai and cash Oman at a premium of $2.27/b to same-month Dubai futures at the market close, up 71 cents/b and 52 cents/b day over day, respectively. February cash Murban was up 71 cents/b on the day at a premium of $2.56/b to same-month Dubai futures. This was a high not seen for cash Dubai and cash Oman since Sept. 27, while cash Murban has now notched its highest level for 2024. (Platts)

Technicals

RB and crude oil momentums are positive, while that for the distillates remains negative.

WTI spot futures have resistance at 71.38-71.44 and then at 72.40-72.49. Support lies at the prior 2 lows at 69.33-69.36. Below that support comes in at 68.42-68.45.

February RB sees support at 1.9507-1.9524 and then at 1.9381-1.9397. Resistance comes in at 1.9896-1.9903 and then at 2.0072-2.0091.

February ULSD sees support at 2.2142-2.2146 and then at 2.2014. Resistance lies at 2.2642-2.2656 and then at 2.2779-2.2797.

Natural Gas --February NG is up 11.2 cents

NG futures are higher as after the near term warm-up, early January is to see temperatures turn cooler and well below average for much of the U.S. Likely also supportive today is the strong TTF market.

According to current weather forecasts, the period from January 2nd to 10th in the U.S. is likely to see temperatures significantly below normal, with a pattern shift expected to bring colder-than-average conditions across much of the country, particularly from the Great Plains to the East Coast. Temperatures are set to fall as much as 12 to 13 degrees during that time period. (Weather.com)

European natural gas prices rose on Friday after Russian President Putin downplayed the chances of securing a deal to continue gas flows to Europe through Ukraine. In addition, Ukrainian President Zelenskiy opposes any plan that channels funds to Russia during the ongoing war. The at-risk flows represent about 5% of Europe’s gas demand. (Investing.com) European gas storage has depleted so far this season at the fastest rate since 2021. Storage inventories have fallen by 19% since the end of September, when storage injections typically end. Storage is currently at 75% of capacity, which is marginally above the 10 year average seasonally. But, by contrast, one year ago inventories stood at 90% of capacity. Storage has drawn as cold weather has invaded the region, and as renewable generation has been weak, and industrial demand has rebounded. (slguardian.org) 

Technically, the TTF futures have gapped up after the market was closed yesterday for the holidays. The gap on the January chart lies from 46.625 to 46.650 Euro/Mwh. Resistance above is seen at 49.24-49.32 Euro/Mwh. Support below is seen at 44.43-44.44 Euro/Mwh. Momentum is positive.

In Wednesday’s late-cycle data, LNG feedgas volumes to the new Plaquemines facility were revised up to 0.65 BCF/d or 37% capacity, a new high. This was enough to push total LNG feedgas demand above 15.07 BCF/d, a new all-time high.

On Thursday, LSEG forecast U.S. natural gas demand to be 132.9 BCF/d this week, falling to 119.8 BCF/d next week. These forecasts were down by a total of 4.6 BCF/d, large due to the revision for next week. Thursday's forecast was down 1.4 BCF/d versus that seen Monday.

Today is the last trading day for the January NG futures, with open interest on the CME for the January contract having fallen to an exceptionally low amount of 1,785 contracts basis Thursday's data, which might lead to greater volatility for the expiring futures contract.

Thursday's selloff was said to have been due to short term warmer weather forecasts. Forecaster Maxar Technologies said temperatures across much of the US will be above normal from December 26-30 before more normal temperatures return early next month. (Barchart) And with Henry Hub next day cash trading just below $3.00, the January futures fell back at the 9 AM NY opening Thursday.

The EIA storage data to be issued today at 10:30 AM is seen as a draw of 95 to 98 BCF. This compares to last year's draw of 87 BCF and the 5 year average draw of 127 BCF.

Technically, the February NG futures daily chart and the DC charts have seen their momentums turn negative. Currently, the January and February contracts are having inside trading days. The transition come Monday to February as the spot futures will further pressure momentum on the DC chart, given the 40+ cents premium that January has. February NG sees support at 3.322-3.3225 and then at the area of Thursday's low at 3.256-3.264. Resistance comes in at 3.471-3.477 and then at 3.536-3.545.

Disclaimer

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