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Crude Continues to Fall Towards Support Below
By: Christopher Lewis | February 2, 2024
• You can see that we have a lot of downward pressure in the crude market during the day as it looks like inflation is going nowhere in the United States.
WTI Crude Oil Technical Analysis
That being said, this is going to be a bit of a buying opportunity before it is all said and done. After all, we’re approaching the $72 level and I think underneath there, you have even more support at the $70 level.
From a longer term perspective, the $68 level has been like a major floor in the market and you have to look at it through that prism as well. I do believe that it is probably only a matter of time before value hunters come back in and when they do, it should be quite glorious. After all, they do tend to be a little bit exuberant, and with oil also having to worry about geopolitical concerns, there’s also the possibility that tensions in the middle East ranted up pricing.
That being said, I’m looking for some type of bounce so if it bounces about a dollar, I’ll be a buyer but until then I’m going to stand on the sidelines and just let the market stabilize itself. Because of this, I think you have to be very cautious, but at the end of the day you also have to look at this through the prism of a market that from a longer term perspective has guarded the area just below quite aggressively.
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Natural Gas Markets Continue to Scrape The Bottom
By: Christopher Lewis | February 2, 2024
• Natural gas markets were relatively quiet during the trading session on Friday, as they continue to scrape the bottom of what seems to be a larger consolidation region.
Natural Gas Technical Analysis
The natural gas market has rallied lightly during the trading session on Friday as we continue to bounce around just above the $2 level. We are rolling over into the next month and therefore a lot of traders are starting to focus on spring. Because of this, it does make quite a bit of sense that natural gas may have trouble rallying, but I do think that we are far enough to the downside right now that we are close to a major support level. With that being the case, I think it’s probably only a matter of time before we bounce, perhaps towards the $2.50 level breaking above there. Then, it opens up the possibility of $3, while underneath we have the $2 level as a hard floor. Keep in mind that natural gas is currently being thrown around by the idea of a busted winter, as the demand for natural gas has fallen off of a cliff.
Furthermore, there is a huge supply of natural gas out there now that the winter has been yet another bust. And with that being the case, there’s no real reason to think that natural gas takes off. In fact, I suspect that we are starting to carve out some type of range for the year between $2 and $3, with the occasional slip outside of that range.
Again, $2.50, I believe is more or less your fair value area and therefore a lot of traders will pay close attention to it. In general, I think you need to maybe look for a buying opportunity and take profit rather quickly. Also, I think this is a range bound market looking for a range bound system for the next several months. This is typical behavior for the natural gas markets, so I think it does make a lot of sense that we would see a return to normalcy as supply of natural gas is well documented, and of course demand will start slipping.
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Collective Cooperation and Harmony. The Energy Report
By: Phil Flynn | February 2, 2024
In a world where it seems like the gates of hell have been opened, it’s nice to know you can find a place where you can find “collective, cooperation and harmony.” Where might that be, you might ask. Well, it is no place other than the good old OPEC cartel.
As OPEC and its favorite co-conspirator Russia agreed to keep the status quo on production and suggested that future production decisions would basically become data-dependent, the meeting turned into a love fest. Kuwait’s oil minister Saad Hamad Nasser al-Barrak just gushed, praising OPEC’s “cooperation and Harmony”. Even Russia‘s warm and fuzzy Deputy Prime Minister seemed to agree. He suggested that the current cuts were just fine and dandy and said that, “Any additional decisions could be taken at any moment and that the Joint Ministerial Monitoring Committee (JMMC) JMMC agreed to take further market actions if needed”. So nice to see that at least someone is getting along in the world.
Oil sold off hard on hopes that the spirit of “collective, cooperation and harmony” might spread in the form of a ceasefire and hostage release in the Gaza Strip. A tweet by Al Jazeera that Israel had agreed to a ceasefire agreement caused an oil market plunge even after the new group recalled and removed the tweet. Yet later headlines raised questions after a Qatar official said there was no ceasefire deal yet for Gaza.
Then we heard from a Hamas official who reportedly said, “We cannot say the current stage of negotiation is zero, and at the same time, we cannot say that we have reached an agreement.” So much for collective peace and harmony.
Even if there is a ceasefire, will it change anything as far as the risks to global oil supply? Does the ceasefire mean that the Houthi rebels will lay down their arms? Does the ceasefire mean Hezbollah will stop attacking? Will there be safe passage again in the Red Sea? When will the ceasefire mean that the US would call off its response against Iran after the Hezbollah bombing that killed three US service people in Jordan?
Well, we have heard from one Iran-backed Iraqi armed group Nujaba who put out a statement that, “We will continue attacks against US forces till Gaza war ends and US forces withdraw from Iraq.
The Wall Street Journal writes that, “The US is said to have approved plans to strike Iranian personnel and facilities in Iraq and Syria in response to a drone attack that killed three US soldiers in Jordan on Sunday. US officials have characterized the response as a “campaign” that could last “weeks”, and will include both airstrikes and cyberattacks, according to NBC. It would target both the Iran-backed militias that carried out the deadly attack and Iranian forces that support them in the region, officials told ABC separately.”
This morning oil rallied back after Iran’s President Ebrahim Raisi gave a speech saying, “We hear the other side say it is not seeking war with Iran. We have said many times that we will not start a war. But if any country engages in bullying, the Islamic Republic will give a strong response.” This came after a report that, “An Iranian Revolutionary Guard advisor was killed in an Israeli strike on Damascus according to a Semi-official Iranian news site.
In Iraq, they’re not feeling too warm and fuzzy about the US dollar. The cradle is reporting that the Finance Committee and iraq’s parliament made a statement on Wednesday calling for the sale of oil and other currencies. The move is to try to shield themselves from the impact of potential sanctions by the United States on the Iraqi banking system.
The other concern for the oil market continues to be stability in the banking system. The stock market rallies on better-than-expected earnings from some of the big tech companies like Meta and Amazon. The underlying concerns and banking could continue to weigh on oil prices. Regional banks have taken a huge hit as the shares of New York Community Bank Corp closed at their lowest level since 2000 Bloomberg reported that the sheriff’s sunk 11% before the day’s previous plunge of 38%. Bloomberg says that the bank at the center of the renewed panic says it believes its stock will recover as investors consider what is called “value-enhancing actions”. Citigroup and JP Morgan have said the broader market has had an overreaction to the regional bank news that should make us feel warm and fuzzy.
On the flip side of that I don’t think too many people are going to be brave enough to be too short ahead of the US planned attacks so unless we see a ceasefire agreed to, more than likely there is an upside risk for prices today.
The power outage that caused flaring at the BP refinery in Whiting should have people in the Midwest scrambling to fill up their gas tanks before prices rise. It’s unclear how long the disruption’s going to take. More than likely it’ll be back online but make no mistake about it, you’ll see those prices go up.
Exxon Mobil could have a good day as it surpassed its earning forecast for the first time in three quarters. Bloomberg reported that adjusted fourth-quarter earnings were $2.48 a share and were $0.26 higher than the consensus estimates.
If on the other hand, we get bad news on the banking front, and they start to fall apart, then we could see crude oil prices go down. Alternately though, the price of oil is headed higher. The OPEC commitment to keep cuts steady and our expectations that we will see better-than-expected demand in the coming weeks and months, we will see the market tighten significantly. While oil prices could dip to just below 70, if it does, that should be a very good low for the rest of the year.
Natural gas prices are going to be focused on the weather. The Freeport LNG export terminal had some delays leading to supplies not falling last week as much as people had thought. The Energy Information Administration reported that working gas in storage was 2,659 Bcf as of Friday, January 26, 2024, according to EIA estimates. This represents a net decrease of 197 Bcf from the previous week. Stocks were 54 Bcf higher than last year at this time and 130 Bcf above the five-year average of 2,529 Bcf. At 2,659 Bcf, the total working gas is within the five-year historical range.
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Energy Daily Market Movers (% Price Change)
By: Marty Armstrong | February 2, 2024
• Top Movers
ICE Newcastle Coal Continuous 0.43 %
• Bottom Movers
NSW Baseload Electricity Continuous 4.17 %
AU - Victoria Base-Load Electricity Futures 3.58 %
NY Crude Oil Futures 2.68 %
AU - Queensland Base-Load Electricity Futures 2.65 %
NY Heating Oil Futures 2.6 %
*Close from the last completed Daily
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Shake And Bank. The Energy Report
By: Phil Flynn | February 1, 2024
The overbought oil market took its eyes off the fundamentals as those old banking stability concerns crept back in. Oil historically performs miserably when bank solvency issues arise and while petroleum mostly shook off the liquidation of China’s massively in-debt real estate developer Evergrande, when the issue hit closer to home, the hedge funds took notice.
Oil reversed gains quickly as word spread of a crash in the share price of New York Community Bancorp which was well over 44% before recovering to be down 38% Wednesday, closing at $6.47, its worst day on record according to the Wall Street Journal. The irony of the situation is that New York Community Bancorp was one of the institutions that acquired assets from Signature Bank, one of the banks that failed in 2023 after California’s Silicon Valley Bank started a run-on regional bank and a run on the oil market.
In March of 2023 when the Silicon Valley Bank failure started to unravel, we saw oil trade lower but in hopes it would be contained and traded as high as $8353 in April 2023. Yet as banks tightened their belts the oil market lost liquidity and recession fears caused oil prices to crash until it finally bottomed out in May of 2023 at $6364. Oil did recover because ultimately the fundamentals for oil were still very good and because the economy did not crash after the failure of other regional banks as well as the downfall of the once mighty Credit Suisse. The oil trade Is sensitive to these developments because it can have a major impact on demand. And with the banks still holding on to massive risk from real estate, it’s causing concerns about the health of the overall economy.
These banking concerns hit the oil market on the same day the Federal Reserve kept interest rates unchanged and happened to remove the line that, “The U.S. banking system is sound and resilient” in the Fed Statement. Now today Bloomberg is reporting that Japan’s bank Aozora lost 20% of its stock value and was tied to US property losses. That sent shares to limit down and raised concerns about the global bank’s exposure to bad real estate bets.
Still, oil is gaining its footing this morning because the fundamentals for oil are still very strong. Not only were the weekly oil inventories very supportive in real terms and on a seasonal basis the fact that the Energy Information Administration once again had to readjust higher their previous demand numbers suggests the potential for a significantly tightening oil market in the coming weeks unless the banking crisis brings us down.
The EIA reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.2 million barrels from the previous week. At 421.9 million barrels, U.S. crude oil inventories are about 5% below the five-year average for this time of year. Total motor gasoline inventories increased by 1.2 million barrels from last week and are about 1% above the five-year average for this time of year. Both finished gasoline and blending components inventories increased last week. Distillate fuel inventories decreased by by 2.5 million barrels last week and are about 5% below the five-year average for this time of year. Total commercial petroleum inventories decreased by 9.6 million barrels last week.
Part of the reason that we saw an increase in crude oil supplies was because exports were down due to the cold weather. On top of that, even with the exports being down because of adjustments, we could have seen supplies fall by 900,000 barrels instead of rise. That was pointed out by oil watcher Patrick Bourque.
Interestingly, weekly gasoline demand blew away expectations. Gasoline demand rose by 264,000 barrels a day to 8.147 million barrels a day. Not bad for parts of the country where we’re afraid to go out in the cold. Some drivers of electric cars that did go out in the cold found that their battery life disappeared. Yet the Energy Information Administration did want to point out to those who believe that we can switch to electric cars that there can be hope. They pointed out that, “Combined sales of hybrid vehicles, plug-in hybrid electric vehicles, and battery electric vehicles (BEV) in the United States rose to 16.3% of total new light-duty vehicle (LDV) sales in 2023, according to data from Wards Intelligence. In 2022, hybrid, plug-in hybrid, and BEV sales were 12.9% of total sales. But before you get excited about the electric transition, Bloomberg is reporting that Volvo will no longer extend funding to its loss-making electronic vehicle maker Pulsar and may distribute shares to other shareholders to focus on Volvo’s own ambitions. I guess their own ambition is making cars that somebody might actually want to buy.
While the fundamental picture for oil extremely bullish, for this time of year the key will be whether or not the market can shake off the concerns about the global economy. So far the banking fears have not hit up on the demand side and with the rising geopolitical risk, we could still see some major price spikes. We’ll watch to see if the market feels that this banking crisis will not start a domino effect that will push the globe into a major recession or raise fears.
On the flip side, if banks start seeing their shares get obliterated and it seeps into the overall market psychology, we could see a drop in oil prices. If the stock market seems to shake off these concerns then oil prices will once again be on guard for a significant price increase. Yesterday Jerome Powell said that the Fed had to be convinced that inflation was on target to get down to their 2% rate before they decided to start cutting interest rates. So the Fed will be watching oil prices closely because the biggest risk to a spike in inflation is the extremely tight global oil market and add to that the possibility of a conflict could send these prices soaring. No wonder the Fed is losing sleep at night.
In yesterday’s Energy Report, I pointed out that Russia was very confident that they could continue to sell their oil and they didn’t have to offer such a large discount because sanctions on Russia have failed. So it’s very interesting that later that day after I wrote that report, Javier Blas from Bloomberg pointed out that even though Biden had an executive order 14066 that banned the import of Russian crude oil the US according to EIA imported 333.000 barrels of oil from Russia last month. So I guess that means we’re funding both sides of the Russian-Ukraine war. Maybe the Biden administration may be colluding with Russia. Or maybe he is just a war profiteer. Just make sure the big guy gets his 10%. Just kidding. Later Javier Blass clarified it saying that the oil was shipped from Russia to the Bahamas before March of 2022 when the US banned Russian import so technically it was excluded from the ban after 18 months in storage. Yet the Chinese Russian oil laundering scheme continues.
Natural gas prices are trying to recover on the possibility that we could get another blast of winter in a couple of weeks. The selling of natural gas seems to have eased after the big spike after the polar vortex. Yet consumers in parts of the country are still going to be paying the price. In Colorado, natural gas prices could be going Rocky Mountain high as Xcel Energy is asking to raise its base rate to sell natural gas by 9.5% because of the cost of Winter Storm Uri. Better be leaving on the jet plane if you don’t want to see those higher prices kick in after winter. Yet t if we don’t see price increases for natural gas a lot of producers and providers are going to have big problems.
Biden’s pause on LNG Terminals will not help CO2 emissions. India will start operating new coal-fired power plants with a combined capacity of 13.9 gigawatts (GW) this year, its power ministry said in a statement to Reuters, the highest annual increase in at least six years. Prime Minister Narendra Modi’s government has cited energy security concerns amid surging power demand and low per-capita emissions to defend India’s high dependence on coal. Power generation in 2023 increased by 11.3%, the fastest pace in at least five years.
In the agricultural market, we’re seeing some incredible stories. The US cattle herd the lowest it’s ever been since the 1950s and we are seeing a record for a soybean crush. The Department of Agriculture reported that the US cattle herd fell to the lowest level since 1951. It is the fifth year in a row that cattle inventories fell. Weak prices for soybeans give them increasing demand. Wheat futures could be ready for a massive turnaround if we indeed get this polar vortex that people are talking about. It’s the winter wheat crop that will be extremely vulnerable because of the lack of snow cover. All these upside risks for commodities against the backdrop of an oil market that is very bullish could lead to another spike of inflation in the coming months.
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Oil inventories fall by more than expected 2.5M barrels last week: API
By: Investing | January 30, 2024
U.S. crude stockpiles fell much more than expected last week, the API reported Tuesday, just as markets brace for the U.S. response to a deadly drone on its forces earlier this week.
Crude Oil WTI Futures, the U.S. benchmark, traded at $77.78 a barrel following the report after settling up 1.4%% at $77.82 a barrel.
U.S. crude inventories fell by about 2.5 million barrels for the week ended Jan. 26, compared with a draw of about 6.7M barrels reported by the API for the previous week. Economists were expecting a decline of about 867,000 barrels.
The fall in supplies come as concerns about disruptions to global inventories from rising geopolitical tensions remain front and center after U.S. President Joe Biden said he has made a decision about how to respond to the deadly drone attack in Jordan.
The API data also showed that gasoline inventories increased by 600,000 barrels last week, while distillate stocks fell by 2.1M barrels.
The official government inventory report due Wednesday is expected to show weekly U.S. crude supplies decreased by about 867,000 barrels last week.
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Today's Futures Heat Map • Strongest: Natural Gas, Palladium, Orange Juice, Treasury Bonds
By: Barchart | January 31, 2024
• Today's Futures Heat Map
Strongest: Natural Gas, Palladium, Orange Juice, Treasury Bonds
Weakest: Gasoline, Crude Oil, Wheat, Hard Red Wheat
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Business Is Good. The Energy Report
By: Phil Flynn | January 31, 2024
Well in this uncertain world, it might bring you some satisfaction that for Russia, business is good. Russia’s Deputy Prime Minister and Putin’s bestie, Alexander Novak, not only agrees with OPEC that the oil demand worldwide will grow by a more than healthy 2 million barrels a day on its way to a record 115 million barrels a day by 2025, he also agrees with Marathon Petroleum which also sees record oil consumption in 2024. And because of record-breaking demand and the failure of the West to enforce sanctions on Russia, they now say they expect to be able to sell their oil with less of a discount. So much for those pesky sanctions.
The problem is that as Europe needs oil more than they need to teach Russia a lesson in Ukraine. While most in Europe are not happy with Russia because of shortsighted green energy policies, they can’t quit them. The response by the West to try to put a price cap on Russian oil so their revenue would fall has not worked like the EU and the Biden administration would have liked. What we have seen is Russia freely flowing to China and they became a massive oil laundering scheme as they bought Russian oil, refined it, and sold it back to Europe for big profits.
Business is also great for Iran even as they prepare for a military response from the Biden administration. Biden said, “I have decided how to respond to the attacks on US troops in Jordan.”
Iran supported the terror group that killed three American Soldiers. Iran’s ability to fund those groups is because the Biden administration has failed to enforce sanctions on their oil.
Remember that as of November 2023, Iran’s oil production is 3.4 million barrels per day (mb/d). This increased from 3.1 mb/d in September 2023 to an average of 2.55 mb/d in 2022. Iran’s oil production has doubled since 2019 when it was less than 2 million barrels per day.
In a sign that maybe Iran knows they may have now bitten off more than they can chew, comes a promise in the form of a statement from the Iranian-backed Iraqi Armed Group Kataib Hezbollah that after they killed US soldiers, they will now suspend military and security operations against US forces. Still, Iran is talking tough because they know they have the power the scare the Biden administration. Not only have Iranian-backed groups attacked US troops over 150 times since last October, they so far seem to be getting bolder because of the weak response from the US.
The US says that they wanted to avoid a wider conflict or maybe because they still want to restart the Iranian nuclear deal that ultimately would have given Iran more money and a nuclear weapon. The pressure is now building on the Biden administration to send a clear message to Iran and Biden said that he has decided on how to respond. US Secretary of State Blinken said, “The response against Iran could be multi-leveled and come in stages and be sustained over time.”
Reuters is reporting that Iran will respond to any threat from the United States, Iranian Revolutionary Guards’ chief Hossein Salami said on Wednesday, as Washington weighs its response to the killing of American servicemen by Tehran-aligned militants. “We hear threats coming from American officials, we tell them that they have already tested us and we now know one another, no threat will be left unanswered,” Salami said, according to the semi-official Tasnim news agency.
Besides, Iran has been very busy trying to help the Houthi rebels shut down Red Sea shipping. The Houthis are being funded with that Iranian oil money so business for the Houthis is good as well. The Houthis are hitting more targets and because their actions may have contributed to the deaths of two navy seals are vowing to continue to attack ships. Reuters reported Yemen’s Iran-aligned Houthi group said on Wednesday it would keep up attacks on U.S. and British warships in the Red Sea in what it called acts of self-defense, stoking fears of long-term disruptions to world trade. In a statement, the group’s military spokesperson said all American and British warships participating in “aggression” against its country were targets.
While it seems like the gates of hell have opened under this administration from a geopolitical standpoint, they seem to be having trouble refilling the SPR as quickly as they had hoped. I guess there are some reports that the Biden administration rejected bids to buy back the oil because they deemed the prices to be too high.
We’re seeing here in the US is tightening. The American Petroleum Institute (API) reported that crude supply fell by 2.5 million barrels. What is more, we saw Cushing, OK supplies fall by 2,000,000 barrels as well. That puts supplies at the lowest level in 12 years in the all-important delivery point.
We also saw a 2.1 million barrel drop in distillate inventories and a slight increase in gasoline supplies of 600,000 barrels but most of that could be blending components. So if you look at the overall supply situation we are tightening significantly and will over the next few weeks. Against this backdrop, it is very important to be hedged. The upside price risks are real and rising. A hedge fund short position may have to be covered. One more price spike could cause the margin to be liquidated.
There is growing displeasure with the Biden administration because they decided to delay liquefied natural gas exports. Not only does this give Russia the upper hand in the global energy dominance department but also hurts US producers. The Biden administration’s energy policies not only are bad for the economy but they’re bad from a geopolitical risk standpoint. It is also bad for our national security.
Natural gas prices are continuing to try to determine whether or not winter is over we did get a little bit of support. I’m predicting that we will get another blast of winter. Some forecasters are saying that we could get another blast in February and if that’s the case, we could see the market bottom here and get a bit of a rally but if the weather forecast turns warm, the price pressure will return.
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Natural Gas Faces Bearish Storm: Will the Downtrend Persist?
By: Bruce Powers | January 30, 2024
• As natural gas plunges below moving averages and technical support, a bearish storm brews, raising concerns about the durability of any potential upside reversal.
Downward pressure remains in natural gas as it barely drops below Monday’s low of 2.047, while today’s low was 2.046. Today’s candle takes the form of a narrow range day, and it is bearish given its location within yesterday’s trading range. Therefore, a decisive drop below today’s low signals a continuation of the bear trend. As we head into the close natural gas is set to close weak, relative to Monday’s wide range red candle. Trading within the day was weak overall, and the chance for downside continuation is strong.
Natural Gas Has Taken a Decisive Decline
Given how hard natural gas has fallen, highlighted by yesterday’s gap down and bearish follow through, the market looks like it is going lower. Natural gas is below all its moving averages and has failed to sustain an upside reversal following the move back above the 200-Day MA in late-September. On November 27 a bear flag breakdown triggered, and subsequent price behavior has been bearish. Yesterday’s decline saw the price of natural gas drop below potential support of the long-term downtrend line, the 88.6% Fibonacci retracement, and the lower falling parallel channel line (dotted purple). The day ended weak, with a close near the low of the day.
Lower Support Likely to be Tested Before Bulls Return
A potential support zone begins from around 2.03 to 1.95 and it is derived from prior swing lows where support was seen in the past year. In addition, a falling ABCD pattern extended by the 127.2% Fibonacci ratio identifies a possible pivot at 1.92. It is possible that a bear trend continuation triggers with a move below 1.95 and then support is seen around 1.92, leading to a bullish reversal.
Downward momentum continued off the recent swing high and might run out of steam by the time a new trend low is reached. A similar situation occurred last April. Support was seen at the prior trend low of 1.97 for a couple weeks, leading to a drop below that price level on one day, followed by a bullish reversal back above the lows.
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Today's Futures Heat Map • Weakest: Lumber, Milk, Nasdaq 100 E-Mini, Russell 2000 E-Mini
By: Barchart | January 30, 2024
• Today's Futures Heat Map
Strongest: Orange Juice, Coffee, Soybean Meal, Soybean
Weakest: Lumber, Milk, Nasdaq 100 E-Mini, Russell 2000 E-Mini
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Squeeze City. The Energy Report
By: Phil Flynn | January 30, 2024
The potential for market squeezes is increasing and I am not just talking about orange juice, but I could be as orange juice has been squeezed! I am also not talking about putting the squeeze on our trade partners with the Biden administration’s politically motivated pause on LNG exports for a supposed climate change review. What I am taking about is the potential for a squeeze on WTI as we see Cushing, Oklahoma supplies fall and a potential developing squeeze on diesel fuel. Not only is the market bracing for a response from the Biden administration on the drone attack in Jordan that was executed by an Iranian-backed group, but also if Biden makes good on the threat to reimpose sanctions on Venezuela and the Maduro regime. This, along with the increasing risk from geopolitical events, could cause a quick run for the exits by hedge funds that continue to favor the short side of the market.
Politico is reporting this morning that the Biden administration is considering retaliatory strikes against Iran which could include large-scale attacks on Iranian and proxy targets in Syria and Iraq as well as targeting Iranian naval assets. This comes a day after Bloomberg reported that, “The Biden administration will restore sanctions on Venezuela’s energy sector if the country upholds its ban on an opposition candidate from running for president, two US officials said, a move that risks chilling recent efforts to improve ties between the two adversaries. The US will allow a six-month suspension on sanctions to expire in April if opposition candidate María Corina Machado is barred from running, and is also considering additional measures, according to the officials, who asked not to be identified discussing private deliberations.
Forbes reported that Chevron CVX % is currently the only U.S. oil major operating in Venezuela. Others have tried to fill the vacuum left by North American capital. European firms have stepped in searching for oil and natural gas: Repsol, Eni, Maurel et Prom, and Shell. This comes as the US crude supply is tightening significantly. Not only have we seen significant droughts in the CME group’s Cushing, OK delivery point, but we are also seeing the possibility of the loss of heavy oil once again as the Biden administration may be forced to crack down on Venezuela.
John Kemp at Reuters points out that, “Crude oil inventories at Cushing have dropped to their lowest level for this time of year in over a decade. The depleting stocks at Cushing and the bearish sentiment on the oil market, especially the recent more negative positioning in WTI Crude, could lead to high prices in the near term. In the three weeks to January 19, inventories at Cushing fell by more than 5 million barrels.
Crude inventories around the NYMEX delivery point at Cushing in Oklahoma had depleted to 30 million barrels on January 19 down from 35 million barrels three weeks earlier. Cushing inventories stood at the lowest for the time of year since 2012 and were 14 million barrels (-32% or -1.26 standard deviations) below the prior ten-year seasonal average. With inventories shrinking, many fund managers concluded it was no longer safe to run short positions potentially requiring delivery at Cushing according to Kemp.
Now because the Biden administration tried to enforce sanctions on Russia, they turned to Venezuela to secure heavy oil that refiners needed to make diesel. Yet the deal with Venezuela was for free and fair elections and the Maduro regime is not following through with that promise.
With increasing risks to supplies not only in the Red Sea but the possibility of an escalation between the US and Iran, the inventory numbers are going to be critical. There is more and more focus of course on the following supplies in Cushing, Oklahoma that are getting to critically low levels. On top of that, we are getting to the point where the seasonality for energies becomes very strong as refiners have to get geared up for the upcoming summer driving season. We still think that there’s a significant risk of an upside breakout and it could get worse if the shorts are forced to cover their positions. Yesterday’s market action was mixed but we think that a drawdown in oil inventories today could start turning this market around.
Natural gas, of course, is getting crushed because of the warm-up in temperatures. The expectations are that natural gas supplies will be ample and will be able to get through winter. We’re still waiting to see if these forecasts continue to stay warmer than normal and if that’s the case, we’re probably going to see a sideways to downward movement in the natural gas market.
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Energy Daily Market Movers (% Price Change)
By: Marty Armstrong | January 30, 2024
• Top Movers
London IPE Gas Oil Futures 2.17 %
• Bottom Movers
AU - Victoria Base-Load Electricity Futures 17.68 %
NSW Baseload Electricity Continuous 7.85 %
NY Natural Gas Futures 5.56 %
AU - Queensland Base-Load Electricity Futures 5.54 %
NYMEX RBOB Gasoline Futures 2.63 %
*Close from the last completed Daily
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Navigating the Natural Gas Downturn: Analyzing Today’s Bearish Move
By: Bruce Powers | January 30, 2024
• Natural gas faces a bearish storm as prices plummet, breaching critical support levels and confirming a persistent downtrend.
It looks like a decision was made today in the price of natural gas and it is bearish. Natural gas began the week by opening with a large gap down, easily falling through several possible support levels including the 88.6% Fibonacci retracement, which was completed at 2.14. Yet, the price continued to fall. It is well on its way to testing and possibly exceeded prior support levels near trend lows from 2.03 to 1.95. At the time of this writing sellers remain in control with trading happening at the lows of the day.
Series of Lower Swing Highs Signaled Downside Pressure
Natural gas has been progressing its downtrend since the breakdown of a rising parallel trend channel, also a large bear flag, consolidation pattern on November 27. Subsequently, it found support at the 2.235 swing low in December and rallied to test prior support levels as resistance. A peak of 3.39 was reached in early-January, followed by a decline.
That peak generated a lower swing high and led to a drop to 2.31. Support was subsequently seen at 2.31 leading to a rally into last week’s interim swing high at 2.88. So, there is a series of lower swing highs in the chart for natural gas starting from the peak in October. When including last week’s swing high, an acceleration in downside momentum can be seen. Today, the bears kicked it into high gear with the gap down opening.
Falling Parallel Channel Breakdown Triggers
To add context to today’s decline, a falling parallel channel has been drawn on the chart in purple. The line originates from the top connecting two swing highs. A copy of the line is then attached to the most recent swing low at 2.235. You can see how the lower line was close to identifying the same price support area as the long-term downtrend line. The gap down today opened at the lower falling purple parallel line and the price of natural gas remains well below it. Moreover, today’s opening was just below potential support around the long-term downtrend line.
Monthly Breakdown: Today’s Decline Triggers a Bearish Shift, Surpassing Last Month’s Low
Further evidence supporting the bearish view can be seen in the monthly chart (not shown). Today’s decline triggered a bearish monthly breakdown as last month’s low at 2.235 was exceeded to the downside.
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Heart Breaking. The Energy Report
By: Phil Flynn | January 29, 2024
Oil prices surged on increasing risk perception after the Iranian-backed militia killed 3 U.S. troops and wounded dozens more as the Biden administration’s Foreign Policy is making the world a more dangerous place and sadly much more dangerous for our men and women in the military. Pressure is building on Biden to respond against Iran as opposed to turning a blind eye to Iranian oil sanctions and giving this terror-sponsoring regime billions of dollars. Biden’s naivete about the danger of this regime has cost us all dearly.
The Wall Street Journal Opinion said, “It was bound to happen eventually, as President Biden was warned repeatedly. A drone or missile launched by Iran’s militia proxies would elude U.S. defenses and kill American soldiers. That’s what happened Sunday as three Americans were killed and 25 wounded at a U.S. base in Jordan near the Syrian border. The question now is what will the Commander in Chief do about it? Biden issued a statement Sunday that, “America’s heart is heavy” at the death of patriots who are the “best of our nation.” That sentiment is nice, and no doubt sincere, but at this point, it is inadequate and infuriating.
The sorry truth is that these casualties are the result of the Biden’s policy choices. Mr. Biden has tolerated more than 150 Iranian proxy attacks on U.S. forces in the Middle East since October. Only occasionally has he or the administration registered more than rhetorical displeasure by retaliating militarily, and only then with limited airstrikes. Biden refused to change course even after U.S. troops suffered traumatic brain injuries. A Christmas Day proxy attack in Iraq left a U.S. Army pilot in a coma. Last week, more than a month later, Chief Warrant Officer 4 Garrett Illerbrunn was finally “sitting up in the chair for the first time for most of the day,” and “alert with both eyes opened and following,” his family’s medical blog says.
Mr. Biden vowed Sunday to, “hold all those responsible to account at a time and in a manner our choosing,” though that stock line rings increasingly hollow. He has no choice now other than to approve strikes in retaliation, but targeting the responsible militia is insufficient. The Journal says one thing to watch is whether the Administration will react to this attack by putting more pressure on Israel to stop its campaign against Hamas. This would validate the claim of the militias that they are merely targeting the U.S. because it supports Israel. And it would tell Iran that its militia drone and missile campaign has succeeded in easing pressure on Hamas. But this is how this administration thinks.
Oil prices popped on the opening Sunday night and have pulled back and filled the gap but are still going to be trading nervous with substantial upside risk. Any ministration is going to have increasing pressure on it to do something. In the meantime the Red Sea is still a danger zone. On Friday an oil tanker was actually hit. The risk to oil supplies is still high.
And while the Biden administration plays politics with liquefied natural gas exports, there are reports that the demand for US natural gas is going through the roof. Breitbart reported that, “Texas Land Commissioner Dawn Buckingham says President Joe Biden’s recent decision to stop approval of Liquified Natural Gas (LNG) exports looks “more like retaliation than a sound policy decision.” Biden’s announcement came one day after, “Texas took a bold stand in defending our border against foreign invaders,” the commissioner added.
Biden announced on January 26 that he was placing a “temporary pause on pending decisions of Liquified Natural Gas exports,” Breitbart News reported. January 26 was also the DHS deadline to send in a letter to the State of Texas demanding access to Shelby Park in Eagle Pass, Texas. The State has not budged on opening up the park seized earlier this month.
This comes as it is being reported that global gas demand growth is expected to surge in 2024 due to colder winter conditions and lower prices, the International Energy Agency’s (IEA) latest report on Friday showed, while warning of renewed price volatility amid geopolitical uncertainties. Significant demand for natural gas in mid-February led to the second-largest reported withdrawal of natural gas from storage in the United States, according to the U.S. Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report (WNGSR). Weekly stocks fell by 338 billion cubic feet (Bcf) in the week ending February 19, 2021. “In 2023, global gas demand rose by just 0.5%, as growth in China, North America, and gas-rich countries in Africa and the Middle East was partially offset by declines in other regions,” said the Paris-based energy agency in its latest Gas Market Report.
According to the report, following the loosening of COVID-19 restrictions and the revival of economic activity, China regained its position as the world’s largest LNG importer, with an increase in its natural gas demand rate of 7%. The report predicts a growth of 2.5%, or 100 billion cubic meters (bcm), in the global demand for gas this year. Expected colder winter weather in 2024, compared with the unusually mild temperatures experienced in 2023, is likely to bring increasing demand for space heating in residential and commercial sectors,” it added.
Reuters reported that – Joe Biden on Friday paused approvals for pending and future applications to export liquefied natural gas (LNG)from new projects, a move cheered by climate activists that could delay decisions on new plants until after the Nov. 5 election. The Department of Energy (DOE) will conduct a review during the pause that will look at the economic and environmental impacts of projects seeking approval to export LNG to Europe and Asia where the fuel is in hot demand.
Natural Gas Intelligence reported that, “in the US The whopping 326 Bcf of natural gas that utilities pulled from storage in the third week of January amplified concerns that capacity may prove inadequate in coming years as U.S. production further escalates to meet global LNG demand.
We continue to warn that there is upside risk of price spikes. Be on guard and be hedged.
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Today's Futures Heat Map • Weakest: Natural Gas, Soybean Oil, Coffee, Gasoline
By: Markets & Mayhem | January 29, 2024
• Today's Futures Heat Map
Strongest: Orange Juice, Bitcoin, Milk, Palladium
Weakest: Natural Gas, Soybean Oil, Coffee, Gasoline
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WTI Crude Oil CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | January 27, 2024
• Following futures positions of non-commercials are as of January 23, 2024.
WTI crude oil: Currently net long 221.3k, up 49.2k.
As soon as the week began, oil bulls claimed the 50-day moving average, which is now flat. By Friday, the 200-day ($77.59) – also flat – was captured, albeit by a touch. For the week, West Texas Intermediate crude rallied 6.5 percent to $78.01/barrel. This followed a back-to-back weekly spinning top and a sideways action for seven weeks, during which it spent most of its time around the low end of a 13-month range between $71-$72 and $81-$82.
WTI peaked last September at $95.03, having rallied from last June’s low of $67.05. On December 13th, it ticked $67.71 intraday before bottoming. This price point is crucial. As things stand, the path of least resistance is toward the upper bound of the aforementioned range.
In the meantime, as per the EIA, US crude production in the week to January 19th tumbled one million barrels per day week-over-week to 12.3 mb/d. Crude imports, too, decreased 1.8 mb/d to 5.6 mb/d. Stocks of crude and distillates declined as well – respectively down 9.2 million barrels and 1.4 million barrels to 420.7 million barrels and 133.3 million barrels. Gasoline inventory, on the other hand, grew 4.9 million barrels to 253 million barrels. Refinery utilization dropped 7.1 percentage points to 85.5 percent.
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NY Crude Oil Futures »» Turning Back UP Weekly Summary Analysis
By: Marty Armstrong | January 27, 2024
NY Crude Oil Futures closed today at 7801 and is trading up about 8.87% for the year from last year's settlement of 7165. This price action here in January is reflecting that this has been still a bearish reactionary trend on the monthly level. As we stand right now, this market has made a new high exceeding the previous month's high reaching thus far 7826 intraday and is still trading above that high of 7676.
ECONOMIC CONFIDENCE MODEL CORRELATION
Here in NY Crude Oil Futures, we do find that this particular market has correlated with our Economic Confidence Model in the past. The Last turning point on the ECM cycle low to line up with this market was 2020 and 2009 and 2001 and 1998 and 1994. The Last turning point on the ECM cycle high to line up with this market was 2022 and 2018 and 2011 and 2000.
MARKET OVERVIEW
NEAR-TERM OUTLOOK
The historical broader tone of the NY Crude Oil Futures has been a bearish consolidation following the high established back in 2008. Since then, this market has created 2 reaction highs which have been unable to break this overall protracted bearish consolidating trend. Still, the major low was made in 2023 and the market has bounced back for the last year. The last Yearly Reversal to be elected was a Bullish at the close of 2023.
This market remains in a positive position on the weekly to yearly levels of our indicating models. Nevertheless, it closed last year on the weak side down from 2022. Pay attention to the Monthly level for any serious change in long-term trend ahead.
Looking at the indicating ranges on the Daily level in the NY Crude Oil Futures, this market remains moderately bullish currently with underlying support beginning at 7525.
On the weekly level, the last important low was established the week of December 11th at 6771, which was down 2 weeks from the high made back during the week of November 27th. We have been generally trading up for the past 6 weeks from the low of the week of December 11th, which has been a move of 15.58%. When we look deeply into the underlying tone of this immediate market, we see it is currently still in a semi neutral posture despite declining from the previous high at 7960 made 8 weeks ago. Still, this market is within our trading envelope which spans between 6147 and 8765.
INTERMEDIATE-TERM OUTLOOK
YEARLY MOMENTUM MODEL INDICATOR
Our Momentum Models are declining at this time with the previous high made 2021 while the last low formed on 2023. However, this market has declined in price with the last cyclical low formed on 2023 warning that this market remains weak at this time on a correlation perspective declining in both price and Momentum.
Looking at the longer-term monthly level, we did see that the market made a high in September 2023 at 9503. After a four month rally from the previous low of 8346, it made last high in September. Since this last high, the market has corrected for four months. However, this market has held important support last month. So far here in January, this market has held above last month's low of 6771 reaching 6771.
Some caution is necessary since the last high 9503 was important given we did obtain one sell signal from that event established during September 2023. That high was still lower than the previous high established at 12368 back during June 2022. Critical support still underlies this market at 6700 and a break of that level on a monthly closing basis would warn of a further decline ahead becomes possible. Nevertheless, at this time, the market is still weak.
Navigating Natural Gas: Unraveling Volatility and Trends
By: Bruce Powers | January 26, 2024
• Natural gas experiences price swings, testing resistance at 2.67 amidst bearish signals, with a focus on closing above the 200-Day line for strength.
Volatility in the price of natural gas continued Friday with an initial drop earlier in the session to a three-day low of 2.42. Buyers then stepped for a rally to a high of 2.67, which was a clear test of resistance at the uptrend line and 20-Day MA. That move put it back above the 200-Day and 50-Day MAs. Regardless, it is on track to close back below the 200-Day line, which is at 2.67. If natural gas can end this week above the 200-Day line, it would be a minor sign of strength.
Watching for Further Clarity
Today’s price action didn’t clarify much but if we had to label along with recent activity, it would be more on the bearish side than the bullish. Specifically, there was a daily bearish reversal signaled today with a drop below yesterday’s low. And the 200-Day line was successfully tested as resistance, a sign of weakening. Over the prior two days the price of natural gas got above the 200-Day line, although it could not remain above it.
Continues to Weaken Since October Peak
The progression of the decline from the October peak of 3.64 is bearish. If we step back and simplify price action recently, we end up with more than a few bearish indications. And again, today we have the same with a test of resistance at the 200-Day line. Including this week’s high there is a series of lower swing highs in the chart. This week’s rally tested resistance around the uptrend line, and it failed to hold, leading to aggressive intraday selling and then today’s bearish continuation. Nonetheless, sometimes when a chart seems clear, something unexpected happens. Since natural gas is sitting relatively near lows, a breakdown is difficult to rely upon.
Just a Couple Bullish Indications
Until there are more signs of strength, there are only a couple bullish indications. First, natural gas put in a higher swing low on January 22. And second, it has tested the long-term downtrend line as support and remains above it. Once volatility dies down a little a recognizable short-term pattern should develop. Today’s high can be watched since it tested the 200-Day line. Therefore, a breakout above it will trigger a daily breakout and a trendline break.
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Oil settles at highest in nearly 8 weeks on strong economic growth
By: Investing | January 26, 2024
HOUSTON (Reuters) -Oil prices rose for a second week in a row and settled at their highest in nearly two months on Friday as positive U.S. economic growth and signs of Chinese stimulus boosted demand expectations, while Middle East supply concerns added support.
Brent crude futures rose $1.12, or 1.4%, to settle at $83.55 a barrel, their highest close since Nov 30. U.S. West Texas Intermediate crude (WTI) (CLc1) climbed 65 cents or 0.8% to $78.01, also the highest close since November.
Both benchmarks made weekly gains of more than 6%, marking their biggest weekly increase since the week ending Oct. 13 after the start of the Israel-Hamas conflict in Gaza.
"Economic stimulus from China, stronger-than-expected 4Q GDP growth in the U.S., cooling U.S. inflation data, ongoing geopolitical risks, and the larger-than-expected 9.2 million-barrel drop in U.S. commercial crude stocks for last week have all combined to wedge prices higher," said Tim Evans, an independent oil market analyst.
The Houthi military spokesperson said naval forces carried out an operation targeting an oil tanker in the Gulf of Aden, causing a fire to break out, adding to worries of supply disruptions.
Oil was also boosted earlier this week by a larger-than-expected drawdown in U.S. crude stockpiles. The depletion in inventories, especially around the WTI delivery point at Cushing in Oklahoma and across the Midwest, could create a squeeze on nearby futures prices.
Supply concerns are evident in the structure of Brent futures. The premium of the first-month contract to the sixth on both Brent and WTI rose to the highest since November, indicating a perception of tighter prompt supply.
A potential fuel supply disruption after a Ukrainian drone attack on an export-oriented oil refinery in southern Russia also supported prices.
On the demand side, the U.S., the world's biggest oil consumer, registered faster-than-expected economic growth in the fourth quarter, data showed on Thursday. Sentiment was also buoyed this week by China's latest measures to boost growth.
Traders, however, bet the U.S. central bank is more likely to start its round of rate cuts in May, rather than March, weighing on crude futures.
Also curbing gains, Baker Hughes said U.S. energy firms this week added two oil rigs, pushing the figure up to 499.
Money managers raised their net long U.S. crude futures and options positions in the week to Jan. 23, the U.S. Commodity Futures Trading Commission (CFTC) said.
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Energy Daily Market Movers (% Price Change)
By: Marty Armstrong | January 26, 2024
• Top Movers
AU - Queensland Base-Load Electricity Futures 0.35 %
• Bottom Movers
AU - Victoria Base-Load Electricity Futures 6.39 %
NSW Baseload Electricity Continuous 4.98 %
ICE Newcastle Coal Continuous 2.92 %
*Close from the last completed Daily
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Today's Futures Heat Map • Weakest: Soybean Meal, Wheat, Hard Red Wheat, Cotton
By: Barchart | January 26, 2024
• Today's Futures Heat Map
Strongest: Bitcoin, Coffee, Platinum, Orange Juice
Weakest: Soybean Meal, Wheat, Hard Red Wheat, Cotton
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The Corn & Ethanol Report
By: Daniel Flynn | January 26, 2024
We kickoff the day with Core PCE Price Index MoM & YoY, Personal Income MoM, Personal Spending MoM, and PCE Price Index MoM & YoY at 7;30 A.M., Pending Home Sales MoM & YoY at 9:00 A.M., and Baker Hughes Oil & Total Rig Count at 12:00 P.M.
The Advance Estimate for US 4th quarter real (inflation-adjusted)GDP showed that the US economy grew at an annualized rate of 3.3%. This exceeded the average trade estimate of 2%, However, the nominal GDP figure of 27.9 trillion was up $329 Billion or 1.2% from the 3rd quarter. At the same time the Federal debt grew $834 Billion or 2.5% to a record-large $34 Trillion. In other word, US GDP would have been negative by a substantial amount were it not been for government spending. The Federal debt exceeded GDP for the first time in 2012, and there have been 3 quarters since that the quarterly debt has rapidly accumulated since, as spending has not been reduced to pre-covid levels.
South American weather pattern stagnates with models trending drier in Argentina in 11-15 day period. With the South American pattern stuck through the first full week of February as a blocking upper level Ridge keeps meaningful rainfall funneled into Northern Brazil. A pattern of below/well-below normal rainfall and warming temperatures if forecast elsewhere. Coming rainfall across North/Northeast Brazil aids later planted soybeans and also boosts subsoil moisture ahead of safrinha corn seeding, the duration of heat/dryness in Argentina and far south Brazil needs watching. Farmers and traders will key on subsoil moisture over the next 8-days. Confidence is forecasts beyond 10-days is low, but the EU, GFA, and Canadian models agree that only lie/scattered showers are probable in Argentina Feb 5-9. Temperatures stay elevated, with highs ranging in low/mid-90’s. We cannot stress enough of the importance of February weather across Argentina’s corn ag belt. Only 30% of Argentina’s corn crop was planted prior to November 30th, with 44% planted in December and 15% in January. A full 70% of Argentina’s corn crop will pollinate after February 1st. And an estimated 65% of Argentina’s soybean crop performance hinges upon weather today into March. In other words, Argentine weather is similar to July/August across the Midwest in terms of yield impact. The CBOT grains are coming in weaker on forecast of rain across Argentina and Southern Brazil in the extended 11-15 day forecast. The primary weather models have gone wetter in the February 6-10th period which is causing weather premium to be extracted from price this morning. The CBOT has been adding and subtracting weather premium all week due to changing extended range forecasts.
CBOT open interest declined Thursday with the exception of bullish interest remaining with soybean oil (Note: Malaysian palm oil), Soybean oil Open interest rose 8,126 contracts on a down day, and the rest of the basket of commodities were down with corn -5,766 contracts, soybeans -2,920 contracts, wheat -6,111 contracts, and soybean meal -979 contracts.
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Crude Oil Markets Look Bullish
By: Christopher Lewis | January 26, 2024
• Crude oil markets have broken through a major resistance barrier this week, and therefore it looks like we are ready to continue the recovery of what had been an oversold market.
WTI Crude Oil Technical Analysis
Crude oil initially pulled back just a bit in the West Texas Intermediate grade on Friday, but it looks like we are trying to turn around and show signs of life again. The 200 day EMA sits just above but after the massive breakout that we’d seen on Thursday, I think we do get some follow through at this point. Underneath the $75 level, I believe, is the short term floor in the market if you will and the 50-day EMA hanging around that area also offers a lot of support. If we were to break down below the 50-day EMA then you can make an argument that we are about to get negative, but we have been consolidating for so long that it does make a lot of sense that we see the market finally break out and reach to the upside. Clearing the 200-day EMA opens up the possibility of a move to the $80 level.
Brent Crude Oil Technical Analysis
Brent markets also look as if they are trying to pressure the upside again early in the session and therefore if we can break the 200 day EMA, we could go to the $85 level. Underneath the $80.50 level was the previous resistance that should now be support and we also have the 50 day EMA coming into the picture just below there as well that could offer support also.
This is a market that much like WTI grade had shown a proclivity to try to break out and now that we are getting out of the accumulation phase, it’ll be interesting to see what happens next. Central banks around the world continue to loosen monetary policy, and I think that’s what most people are paying the most attention to. And if that is going to be the case, it should drive up demand for energy in the long term. Right now, I expect to see a lot of volatility, but I still see a buy on the dip type of mentality out there and that’s exactly how I’m going to approach this market. I have no interest in shorting Brent or WTI anytime soon.
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Natural Gas Markets Rollover
By: Christopher Lewis | January 26, 2024
• Natural gas markets have fallen a bit from the crucial $2.50 level, but at this point in time I think we are still in the midst of trying to carve out a bigger range that the market can follow.
Natural Gas Technical Analysis
The natural gas markets initially tried to rally on Friday but gave up gains rather quickly. The $2.50 level seems to be an area where a lot of people would be interested in the market as it is essentially fair value in the overall consolidation range, with the $2 level underneath being massive support and the $3 level, and then the $3.33 level, both offering significant resistance. Ultimately, this is a market that given enough time is going to have to come to grips with the idea that perhaps the winter has been a complete bust. The massive snowstorms and cold weather failed to show up again, and therefore I think we’re about to head into some type of trading range. That does make sense.
Natural gas likes these ranges over the longer term and therefore, I think you’ve got to look at it through the prism of a market that is trying to find its equilibrium. I would suggest that the $2.50 level is its equilibrium at the moment and therefore since we are just below there, I would assume that we’re just going to consolidate sideways. Quite often, this market does that so it would not be a huge surprise either way. With this being the case, I think you have to look at this market through swing trading eyes instead of trying to get too aggressive on short-term charts as the noise is deafening at times.
There’s really nothing out there to move the natural gas markets at the moment. So, what I prefer to do is wait till it gets to the outer edges of its range and trade accordingly in a somewhat longer term range bound system. Natural gas is a very volatile market, obviously, and if we get some type of massive weather related event in the northeastern part of the United States, it can move the market quite rapidly. So, you always want to be cautious about your position size in this market as you can get into a lot of trouble rather quickly.
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Freeze The World. The Energy Report
By: Phil Flynn | January 26, 2024
It’s official, the Biden administration is giving in to groups like the Sierra Club and big green political donors in pausing the approval of exports of new liquefied natural gas projects on Friday. This is another slap in the face to the US Energy Industry, whose trade group the American Petroleum Institute is warning that these types of decisions from this administration are doing long-term harm to the American people’s energy security and sowing the seeds of the next major energy crisis. The move is short-sighted and will cause harm to the US oil and gas industries and could bankrupt many smaller producers who rose to the occasion and kept America warm during the recent polar vortex. Because when the going gets tough the US oil and gas industry gets going.
Just take a moment to consider the fact that during the recent cold blast, 62% of all energy in the United States was powered by natural gas. The reason why gas was the leader is because not only is it one of the most reliable heating fuels, it is because the US oil and gas industry and their cheaper prices made those supplies inexpensive and abundant.
If natural gas was not available, we would have been powered by much dirtier burning coal. I think it’s almost amazing that coal only provided 10% of the energy during the recent cold snap. Petroleum only provided 13%.
Without US producers of natural gas, the emission output by the recent record demand due to the cold would have been a lot worse. The same will be true for the world if the US, which is the “Saudi Arabia” of natural gas, decides to break its commitment to the world by providing cheap cleaner liquefied natural gas (LNG). Without US LNG exports to meet future demand needs, countries in the developing world will turn to dirtier sources of energy. Yet that is what groups like the Sierra Club must want or maybe they would just prefer that people just freeze to death and that ultimately would reduce their carbon footprint.
Oh, sure they will tell you that they just want to replace fossil fuels with clean energy sources like wind and solar but based on the data on the recent cold blasts shows that they are nowhere close to making up the difference. During the record-breaking demand, solar power was only able to provide 1% of the energy that was needed and wind power could only provide 4%.
Now with the United States and the Biden administration trying to put more reliance on unreliable wind and solar the question is during extreme weather events will we be able to keep the lights on? Will our businesses be able to thrive? Will be able to keep people alive?
Reuters reported that the Department of Energy (DOE) will conduct a review during the pause that will look at the economic and environmental impacts of projects seeking approval to export LNG to Europe and Asia where the fuel is in hot demand. The review will take months and then will be open to public comment which will take further time, Energy Secretary Jennifer Granholm told reporters in a teleconference.
Biden said in a statement: “During this period, we will take a hard look at the impacts of LNG exports on energy costs, America’s energy security, and our environment.” He said the pause, “sees the climate crisis for what it is: the existential threat of our time.”
Let’s talk about some of President Biden’s non-existential threats of our times such as the growing risk of a third world war. This morning, we are getting reports that China is sending aircraft to make a show of force against Taiwan. Today the Taiwan defense ministry said that they detected 23 Chinese military aircraft around Taiwan on Friday. This comes after Reuters reported that, “Chinese officials have asked their Iranian counterparts to help rein in attacks on ships in the Red Sea by the Iran-backed Houthis or risk harming business relations with Beijing, four Iranian sources and a diplomat familiar with the matter said. It was the Iranian-backed Houthis Rebels who showed unbelievable aggression toward ships in the Red Sea. While the Biden administration says they don’t want a direct conflict with Iran. It seems that Iran is not fearing an escalation of tensions. Iran is a major financial and logistic backer of Hezbollah and Hamas. The market is still shocked by Hamas’s horrific actions against humanity yet the Biden administration at this point wants Israel to wind down the war.
It is being reported that Biden last week pressed Israeli PM Netanyahu to scale down the Israeli military operation in Gaza, stressing he is not in it for a year of war. Global oil prices are starting to surge although Red Sea oil shipments have only been delayed and they have not been denied. Chinese stimulus hope is driving the price of oil higher and while some may be disappointed by the size of the stimulus, it will add to the growing concerns about a supply deficit.
This morning we’re getting reports that OPEC is already deciding to keep the status quo on production cuts at its next meeting. Financial Juice reports that OPEC+ JMMC meeting on February 1st is unlikely to decide on production volumes after April 1st, and will wait for several weeks – five OPEC+ sources. The potential supply squeeze in the global oil market is coming at a time when we see strong seasonal bullish patterns developing for petroleum. Not only is the seasonal tendency strong for oil to run up late January into February in the next couple of weeks, the market is already starting to prepare for the upcoming summer driving season. See there’s hope that we might see summer again.
For example, the Moore e Research Center one of the top seasonal tendency reports in the country, points out that the July gasoline over heating oil spread has gone up in February 15 years in a row, more specifically between February 3rd and February 26th. While that spread can be extremely volatile and is known as the widow maker, the tendency is extremely strong if the market starts to try to entice refiners to produce gasoline should be ready by the 4th of July. They also see a bull spread that has made money 14 out of the last 15 years and they recommend buying September RBOB versus gasoline versus December our RBOB gasoline between February 4th and February 23rd.
They also recommend September’s gasoline crack spread where you buy the RBOB gasoline and you sell the crude between February 7th and February 20th that trade has made money 15 years in a row. Another recommendation is being long June crude and short December crude in a bull spread that’s made 14 out of the last 15 years in a row.
Now everybody has to remember that despite the seasonal track records, every year is different and you also have to take into account the potential risk of each trade. Some years, even though the trades make money, sometimes you have to take an excessive amount of risk to make that profit. And yes in other words past performance is no guarantee of future results. At the same time, the market cannot ignore the fact that normally we start to see these prices rise and that could be especially true in a year where the risks to supply is high and the demand continues to stay strong.
Natural gas record-breaking demand during the cold front led to one of the largest supply withdrawals in the history of the natural gas market. Gurgen Ayvazyan reports that this year’s week 3 natural gas withdrawal was the single largest in history and was 178bcf higher than the 5-year average. EIA said that, “Working gas in storage was 2,856 Bcf as of Friday, January 19, 2024, according to EIA estimates.
This represents a net decrease of 326 Bcf from the previous week. Stocks were 110 Bcf higher than last year at this time and 142 Bcf above the five-year average of 2,714 Bcf. At 2,856 Bcf, the total working gas is within the five-year historical range. The EIA also says that the natural gas market will return to growth in 2024. Global gas demand is forecast to rise by 2.5% this year after declines in 2022-2023. Demand recovery will be supported by industries.
With that forecast, it makes no sense that the Biden administration is looking to ban LNG exports. The Biden administration is only interested and appeasing their base and their donors ahead of the election.
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Today's Futures Heat Map • Strongest: Heating Oil, Milk, Hard Red Wheat, Crude Oil
By: Barchart | January 25, 2024
• Today's Futures Heat Map
Strongest: Heating Oil, Milk, Hard Red Wheat, Crude Oil
Weakest: Palladium, Cocoa, Platinum, Soybean Oil
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Decoding Natural Gas Trends: Bulls vs. Bears in a Tug of War
By: Bruce Powers | January 25, 2024
• Natural gas faces a crossroads, battling bearish signals after hitting 2.88. Bulls and bears engage in a tug of war, leaving the market in uncertainty.
Natural gas rallies to a high of 2.88 on Thursday and completes a 50% retracement. Resistance was encountered around that high leading to a sharp intraday selloff that took natural gas back down. The rally busted through all the moving averages (20, 50, 200), as well as the uptrend line before reaching the 50% level. During the decline there was little sign of support around the moving averages or any level for that matter until the area around the low from four days ago was reached, leading to a minor bounce.
Rally Earlier in Day Gives Way to Selling Pressure
Yesterday, natural gas recognized the 200-Day MA as it closed slightly above it. Despite the opportunity to close in a position of strength it looks like it is going to end today’s session in a weak position and continue the uncertainty about what might come next. There is argument for both the bull and bear side of the outlook.
Today’s bounce busted through several price levels with little hesitation. However, the subsequent bearish intraday reversal negated those bullish signals as natural gas is set to close below the 200-Day MA, a key trend indicator, leaving the bears in charge. By chance, if it can strengthen before the close and end above the 200-Day line, now at 2.67, it might have a chance to recover more of today’s decline over the next few days.
Bearish Perspective
Since last February’s 1,987 low natural gas has been working on either completing a bottom or a bearish continuation pattern. More recent price behavior is supportive of the bearish possibility. A sharp decline of at least 72% preceded the 1,987 bottom and it was followed by a multi-month ascending parallel trend channel.
Together, the preceding decline and parallel channel set up a bearish flag pattern. That pattern triggered on November 27, and it was followed by a test of the channel as resistance on a rally following the December 13 swing low at 2.36. That rally eventually failed and led to a second swing low at 2.31 earlier this week. If this week’s rally fails to recover above today’s high there will be a third recent lower swing high recreated, which reflects underlying weakness.
Bullish Perspective
For the bullish side, a breakout of the long-term downtrend line triggered in early October, and it was followed by two tests of the line as support. Arguably, the most recent was this week’s low, although it is not yet clear whether that low will stick. Similar price behavior was seen regarding the 200-Day MA. A breakout triggered in late September, but a successful test of the line has not happened. This is why if it does happen (close above today for example or tomorrow), it should be a short-term bullish indication.
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Crude Oil is now at its highest price in almost 2 months
By: Barchart | January 25, 2024
• Crude Oil is now at its highest price in almost 2 months.
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Exxon Mobil $XOM One of several names in the energy sector attempting to form a bottom
By: TrendSpider | January 25, 2024
• $XOM One of several names in the energy sector attempting to form a bottom.
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Natural Gas Markets Continue to Hover at Same Region
By: Christopher Lewis | January 25, 2024
• Natural gas markets have rallied initially during the trading session on Thursday but has shown signs of exhaustion as natural gas has quite a few headwinds just above from a technical analysis standpoint, and quite frankly the fundamentals are not good either.
Natural Gas Technical Analysis
The natural gas markets initially rallied just a bit during the trading session on Thursday, but they gave back a bit of the gains. Now at this point, we have filled the gap from the open on Monday and it looks like we are going to slow down to the $2.50 level, which I think is an area where we could be attracted to it because it is more or less fair value. When I look at the totality of the market, the $2 level underneath is significant support, while the $3 level above is significant resistance. That being said, I do think that the resistance also extends to the $3.33 level, so that is possible as well.
Keep in mind that we are getting close to the end of winter. Remember, futures markets are actually starting to price in March now, and therefore it is going to put some type of downward pressure on natural gas due to the fact that heating demand will drop. This winter has pretty much been a bust as there have been one or two weeks here and there that have been extraordinarily strong, but beyond that, we really haven’t taken off. And that’s mainly because the weather itself has been somewhat mild. So, with that, I think we are getting ready to head into a range for probably most of the year.
The $2 level underneath would be support and again, the $3.33 level above is the ceiling. I’m going to trade this pair like that, or this market like that, for the rest of the year. Now, having said that, we are essentially in the middle, and that means to me that it’s a very neutral market, but based on the exhaustion in the very short term I would not be surprised at all to see this market pull back. If we do rally, the 50 day EMA sits right around the $2.75 level and that could cause a little bit of resistance as well.
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Crude Oil Markets Continue to Look Bullish
By: Christopher Lewis | January 25, 2024
• Crude oil markets are threatening a major breakout at the moment, and therefore we need to pay close attention to what’s going on in both grades.
WTI Crude Oil Technical Analysis
The crude oil market rallied early during the trading session on Thursday, so it looks like we are trying to break out to the upside. After all, the markets have been basing for a while and now I think we have a real shot at oil taking off to the upside, perhaps trying to do everything it can to recover, maybe due to the idea that central banks around the world are going to loosen monetary policy.
Maybe it has to do with the fact that there are attacks in the Red Sea that affect production, or maybe it’s also due to a couple of refineries being shut down, at least in the short term. Either way, it doesn’t really matter because what we do see is a market that has broken above a barrier, and now it looks like we are trying to go look into the 200-day EMA. Short-term pullbacks at this point in time in WTI, I believe, are buying opportunities with the 50-day EMA sitting just below $75, perhaps offering a bit of support.
Brent Crude Oil Technical Analysis
The Brent market looks very much the same, testing the $80.50 level, and it looks like we are breaking out at this point. Ultimately, I think this is a situation where we eventually go looking to the 200-day EMA above, and I think that 200-day EMA will be a bit of a target.
Short-term pullbacks at this point in time will continue to be buying opportunities in Brent as well and of course, both markets do tend to move in the same direction. I think we have been consolidating for a while, trying to build up some type of accumulation phase and we are in the process of perhaps seeing it try to break to the upside. If the economy does end up being at least decent in 2024, then oil will continue to go higher.
We have an oversupply of oil at the moment as far as production is concerned, but that may be shifting and if we get loose monetary policy coming out of all of the major central banks around the world, that will cause more demand due to more business being transacted. So, it’ll be interesting to see how this plays out, but it certainly looks like we are ready to go higher.
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US Embargo! The Energy Report
By: Phil Flynn | January 25, 2024
How would we feel if Saudi Arabia, in the name of saving the planet, decided to restrict oil exports? Well, the well-funded climate zealots of the high religion of saving the planet have pressured the Biden administration into delaying a decision on US Liquified Natural Gas (LNG) exports that not only make a move toward net zero emissions almost impossible but will inflate global energy prices and force many US natural gas producers out of business. In banning US natural gas exports, the US will lose its global economic advantage by having the cheapest hydrocarbons on the planet and that will inspire more manufacturing to go to other countries where their environmental standards are much lower than here in the US.
The story was given to the New York Times reporter Coral Davenport by one of those unnamed White House sources. The Times wrote that, “The Biden administration is pausing a decision on whether to approve what would be the largest natural gas export terminal in the United States, a delay that could stretch past the November election and spell trouble for that project and 16 other proposed terminals, according to three people with knowledge of the matter. The White House is directing the Energy Department to expand its evaluation of the project to consider its impact on climate change, as well as the economy and national security, said these people, who spoke on condition of anonymity because they were not authorized to publicly discuss internal deliberations. The Energy Department has never rejected a proposed natural gas project because of its expected environmental impact.”
Well, I can help them with that. The increased use of natural gas has been one of the biggest driving forces in reducing greenhouse gas emissions by replacing coal and oil while lowering costs for food and fertilizer so poor people do not freeze or starve. A short-sighted move by this administration to ban LNG exports would increase the odds of those things happening. The thing is that I believe the Administration already knows that, so the delay is just to appease their green energy donors. If they follow through with the ban many natural gas producers in the US that are already on the bubble more than likely, will have to shut-in wells and declare bankruptcy. The US is the Saudi Arabia of natural gas and if we restrict exports, it will have a devastating affect on the poor and the environment.
The Energy Information Administration reported today that U.S. dry natural gas production in the Lower 48 states reached an all-time monthly high of 105.5 billion cubic feet per day (Bcf/d) in December 2023, according to data from S&P Global Commodity Insights. In 2023, Lower 48 dry natural gas production increased by 3.7% (3.6 Bcf/d) from 2022. Dry natural gas production increased by 3.8 Bcf/d in the fourth quarter of 2023 (4Q23) compared with the average for the first three quarters of 2023.
Without US LNG countries like China and India and other countries in the developing world will be forced to use different forms of energy like oil and coal to keep the lights on. And to go back to my original question how would we feel if Saudi Arabia cut off their oil export? It was 50 years ago, during the Arab oil embargo, the United States fell vulnerable when Arab nations cut off our energy supply. It was a wake-up call that we needed to become more energy independent. Now that we have achieved that goal, it is wrong headed to step back into the abyss and put our energy security in the hands of others at the same time other countries will be upset at the United States for restricting our exports of a commodity that is going to be extremely valuable to them to allow their countries to feed and employ their people.
The futures market, the global economy and even the International Energy Agency have been counting on US LNG. Without it, there will be negative consequences no matter what side of the green fence you are on.
Both oil and natural gas are on a tear today. Oil is breaking out as the supply side fear that we have been warning about is starting to become a reality. Oil surged to the highest level in two months driven by hopes that a Chinese stimulus package will keep Chinese oil demand on an upward trajectory and a massive drawdown in the US oil supply.
The Energy Information Administration (EIA) reported in its polar vortex impacted report that US crude inventories fell by more than 9 million barrels last week, to hit the lowest level since October, while total oil stockpiles nationwide had the biggest weekly decline since 2016 according to Bloomberg news. So at 420.7 million barrels, U.S. crude oil inventories are about 5% below the five-year average for this time of year. US oil production got frozen out, dropping from 13.3 million barrels a day to 12.3 million barrels a day. To get back up to the high, it might take a month or more and even longer if we get hit with Polar vortex 2, which some are predicting could happen.
Total motor gasoline did increase by 4.9 million barrels from last week and is about 1% above the five-year. finished gasoline inventories decreased while blending components inventories increased last week. Can’t run your car on blending components. Distillate fuel inventories decreased by 1.4 million barrels last week and are about 4% below the five-year average for this time of year. Total commercial petroleum inventories decreased by 22.3 million barrels last week.
Looking at the four-week demand picture is looking impressive. Demand averaged 19.5 million barrels a day, up by 3.3% from the same period last year. Gasoline demand averaged 8.1 million barrels a day, up by 3.7% from the same period last year. Distillate fuel demand averaged 3.4 million barrels a day over the past four weeks, down by 6.9% from the same period last year. Jet fuel product demand was up 1.6% compared with the same four-week period last year.
The global market is starting to take more seriously the geopolitical risk factors. The Iranian-backed Houthis are claiming this morning that their naval forces directly hit a US military ship. This comes as the Biden administration desperately pleads with Iran that they don’t want a wider war. Yet Iran may. ABC news reports that, “Iran’s top diplomat told ABC News Chief Global Affairs Correspondent Martha Raddatz in an exclusive interview Tuesday. “The scope of the war has become wider. This means that the danger of having a wider war in the region has gone up,” Iranian Foreign Minister Hossein Amir-Abdollahian said, blaming the U.S. and Israel for the escalating tensions. “If the U.S. today stops its backing — logistical and weapons, political and media support — of the genocidal war launched by Israel, then I can assure you that [Israeli Prime Minister Benjamin] Netanyahu will not survive for 10 minutes,” he asserted. “So the key to solving the problem is in Washington before it is in Tel Aviv.”
The geopolitical risk factors have risen dramatically under Biden whether it’s the war in Ukraine or the increasing tensions with China and now by the belligerent actions by Iran sure seems to suggest that the risk factors for oil more than likely will continue to rise.
Now with the world heading into a global supply deficit and with shipments of oil being delayed, is one of the main reasons why you need to be hedged in these perilous times.
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Chart Analysis: Unveiling the Battle Between Bulls and Bears in Natural Gas Market
By: Bruce Powers | January 24, 2024
• Natural gas faces a critical juncture as it tests resistance around the 200-Day MA, revealing insights into demand strength and a potential double bottom formation.
Natural gas continued to strengthen on Wednesday, closing a gap and testing resistance around the 200-Day MA (blue). The high for the day was 2.66 at the time of this writing and the 200-Day MA is at 2.67. A resistance zone begins around the 200-Day line and goes to the 38.2% retracement at 2.72 and then to a high of 2.76, which is represented by the 20-Day MA (purple). Also, close by is the 50-Day MA at 2.74.
200-Day Moving Average Tested as Resistance
The 200-Day line failed to hold as support on the way down last week and it is now being tested as resistance. It tells us something about the strength of demand and the bottoming process. Monday’s swing low at 2.31 is slightly higher than the December swing low, a mild sign of strength. In addition, it may indicate a successful test of support around the long-term downtrend line. Price was rejected to the upside following a short time under the line in December. This week may be the second test.
Daily Close Above 2.76 Should Lead to Higher Prices
A daily close above the 200-Day line would improve the chance for higher prices and the possibility that this week’s low, along with the December swing low, creates a double bottom. However, we won’t know until there is a breakout above the recent swing high at 3.39. A breakout above the 200-Day line followed by a daily close above it increases the chance for that to occur.
Notice that the 20-Day and 50-Day MAs have converged at the top of the resistance zone noted above. This means that a breakout above 2.76 will put the price of natural gas above the three moving averages. That will be a sign of strength if natural gas can stay above the lines and rise to test higher prices. The 50% and 61.8% retracements as shown on the chart may see minor resistance.
Relationship to Lower Channel Line Will be Revealing
Another key possible resistance line is the long-term uptrend line. It is at the lower boundary of the rising parallel trend channel. Natural gas rose above it for a short time earlier this month before encountering resistance around the 78.6% Fibonacci retracement and subsequently falling back below the 200-Day MA.
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Today's Futures Heat Map • Strongest: Natural Gas, Cocoa, Sugar, Wheat
By: Barchart | January 24, 2024
• Today's Futures Heat Map
Strongest: Natural Gas, Cocoa, Sugar, Wheat
Weakest: Soybean Oil, Coffee, Milk, Russell 2000 E-Mini
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Energy Daily Market Movers (% Price Change)
By: Marty Armstrong | January 24, 2024
• Top Movers
NY Natural Gas Futures 1.98 %
London IPE Gas Oil Futures 1.73 %
• Bottom Movers
AU - Queensland Base-Load Electricity Futures 6.16 %
AU - Victoria Base-Load Electricity Futures 4.85 %
NYMEX RBOB Gasoline Futures 1.22 %
NSW Baseload Electricity Continuous 0.99 %
London IPE Brent Crude Futures 0.64 %
*Close from the last completed Daily
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Natural Gas Markets Continue to Recover
By: Christopher Lewis | January 24, 2024
• Natural gas markets rallied a bit during the course of the trading session on Wednesday, reaching above the $2.50 level. All things being equal, this is a market that I think continues to see a lot of volatility.
Natural Gas Technical Analysis
Taking a look at the natural gas markets you can see that they rallied a bit during the trading session on Wednesday in the early hours. However, it does look like we are going to have to deal with a gap at this point. I think it’s probably only a matter of time before natural gas starts selling off again, so I’m looking for signs of exhaustion.
We are right around the $2.50 level. So that being the case, I think you’ve got to look at it through the prism of trying to form some type of range longer term. When I look at the charts rather zoomed out, I suspect that the $2 level underneath is going to continue to be the floor in the market, while the $3 level above, perhaps even as high as $3.33, will be your ceiling.
We are in an area where you would expect to see a little bit of a bounce, but I think the uptrend or any upward movement at that point is somewhat limited. Futures traders are already starting to look towards the March contract, and that of course means that winter is almost over. It’s not that we can’t rally, of course we can, and it’s not even that we can’t break out to the upside, it’s just that we have a massive amount of supply out there and quite frankly, the winter has been extraordinarily mild.
The northeastern United States has been spared any serious weather until recently. And at this point in time, one would think that there might only be one more winter storm ahead, and therefore heating demand will drop. From an industrial standpoint, you also have to wonder how much demand there will be for natural gas if electricity consumption drops due to a recession.
With this, I think we will continue to look at this market through the prism of a range between the $2 level on the bottom and the $3.33 level on the top, perhaps for the next several months. As we’re around that crucial $2.50 level, I would expect to see a little bit of confusion, but the closer we get to the 20-day EMA or the 50-day EMA, the more likely I am to start selling again.
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Crude Oil Markets Continue to Reach to The Upside
By: Christopher Lewis | January 24, 2024
• The crude oil market rallied a bit during the early hours on Wednesday as it looks like we are trying to break out to the upside and get out of a significant consolidation region.
WTI Crude Oil Technical Analysis
The crude oil market has initially pulled back just a bit during the trading session on Wednesday, only to turn around and show signs of strength again. The West Texas Intermediate Crude Oil Market has certainly been pressuring the $75 level, an area that obviously is a large, round number, that will attract a certain amount of attention and I think at this point we’ll be paying close attention to whether or not we can actually stay above there. If we can, then the market will enter a much more bullish phase from everything that I see. Furthermore, I think the 200-day EMA will then be targeted, which would make quite a bit of sense as well. Short-term pull backs continue to offer buying opportunities that I think traders will flock to, with the $71 level underneath offering major support.
Brent Crude Oil Technical Analysis
In the Brent market, we have very much the same. We had an initial pullback, and now it looks like we are trying to do everything we can to reach the $80.50 level. The $80.50 level is an area that’s been massive resistance previously, and I think if we can break above there, much like in the WTI market, we will see Brent try to reach the 200 day EMA.
All things being equal, I think this is buy on the dips and I think 75 is an area that a lot of people will be paying attention to. So, with that being the case, I like the idea of buying dips in crude oil. I think it’s probably only a matter of time before buyers come in and try to take advantage of cheap crude oil. There are a lot of things going on at the same time though, so you do have to be cognizant of that.
For example, we have to worry about whether or not the Red Sea attacks actually disrupt crude oil. We have to worry about whether or not economic demand will drive crude oil prices higher or not. And of course, any moves that OPEC makes.
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The Package. The Energy Report
By: Phil Flynn | January 24, 2024
Call it a silver package or maybe a copper package. Silver and copper are surging, and oil is being supported as China is taking steps to try to shock and awe its beleaguered economy out of a tailspin. Talk of a big rescue package is making the rounds and steps today by the Chinese government suggest that that could be coming sooner rather than later. The Wall Street Journal reports that, “China’s central bank announced new steps to boost bank lending to households and businesses, an early move in what is expected to be a broad but restrained campaign by authorities to prop up growth this year after a lackluster 2023. It comes on the heels of signs of gathering government support for China’s swooning stock market, with investors detecting a rash of share buying by pension funds, insurers and other state-linked firms.” Even Jack Ma is buying back shares of his own company. I wonder what gave him that idea?
The Wall Street Journal wrote that, “Wednesday’s reserve reduction marked the third such move in less than a year, following cuts of one-quarter of a percentage point first in March and again in September last year. The latest cut will take the average reserve requirement across all banks to around 7%, from 7.4% previously. Effective Thursday, the central bank also intends to cut some key rates linked to loans for small firms and rural enterprises.”
The market is expecting a broader rescue package that should move to support industrial metals grains and oil assuming that the package is deemed strong enough by the markets. Bloomberg reported yesterday that, “Premier Li Qiang was calling for “forceful” steps to shore up the words worst worst-performing stock market. Bloomberg wrote, “Policymakers are seeking to mobilize about 2 trillion yuan ($278 billion), mainly from the offshore accounts of Chinese state-owned enterprises, as part of a stabilization fund to buy shares onshore through the Hong Kong exchange link, said the people, asking not to be identified discussing a private matter. They have also earmarked at least 300 billion yuan of local funds to invest in onshore “shares through China Securities Finance Corp. or Central Huijin Investment Ltd., the people said.”
China is still a driving force for oil demand even as India will start to overtake them from a demand growth perspective. John Kemp at Reuters reported that, “India’s petroleum consumption climbed to a new record last year and the country is on course to overtake China as the primary driver of incremental oil consumption before 2030. Kemp says, “While China’s oil consumption is expected to peak before the end of the decade and start to fall, India’s will continue increasing throughout the 2030s. India is already the second-most important driver of incremental consumption in the world and is on course to take the top spot before 2030. Bloomberg is reporting that the cost of shipping fuel to Asia is up 182% since the Yemen airstrikes. Can you say inflation?
Oil rose after reports that the US is expanding its war. Reuters reported, “The United States carried out strikes in Iraq against three facilities linked to Iran-backed militia on Tuesday, the Pentagon said, after a weekend attack on an Iraqi air base that wounded U.S. forces. U.S. troops in Iraq and Syria have been attacked about 150 times by Iran-aligned militants since the Israel-Gaza war started in October, creating pressure on Joe Biden to respond militarily, despite political sensitivities in Baghdad according to Reuters.
Oil inventories are still going to be a driving force in the oil price renaissance. Yesterday the American Petroleum Institute (API) weather-beaten inventory report showed a massive 6.674 million barrel crude oil draw. The excitement about the big plunge was tempered by an incredible 7.183 million barrel increase in gasoline supplies, part of that build was blending component and the other part was because people couldn’t get out of their house because of the snow and the cold. Distilling inventories also fell slightly by 245,000 barrels.
If you look at the global demand numbers it’s still incredibly strong and now with the possibility of a massive shot of Chinese stimulus and increased demand expectations in Europe and Asia, we’re probably setting the stage for a pretty good rally. The technicals are starting to look more positive and while we could use a close above 75 to get this market moving, the downside is looking more limited by the day.
Natural gas will see perhaps one of the largest supply drawdowns in history this week. Natural gas prices are now getting a little bit of a boost after the plunge that we saw on Sunday night because weather forecasts are starting to turn colder once again. EBW analytics is still bearish overall. They write that , ”While Winter Storm Gerri may lead to the third-largest EIA withdrawal in history, the 1-15 day outlook appears likely to smash all-time warm records as extreme weather volatility shed 81 gHDDs and 139 Bcf in under two weeks—numerous catalysts for volatility cloud the immediate-term outlook. Barring a return to severe cold, however, bearish fundamental pressure appears favored as the March contract assumes the NYMEX front-month position next week.
While another half of winter remains, as the market shifts its focus to the 2024 injection season, growing oversupply fears are likely to predominate—and may send natural gas sub-$2.00/MMBtu in an attempt to shake out production. The reality is that many natural gas producers are already under financial duress and while BW is right that they may try to squeeze some more out, if we don’t see a big sustained cold blast most of them are going to a fall by the wayside regardless.
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Navigating Natural Gas: Assessing Support Zones Amid Market Volatility
By: Bruce Powers | January 24, 2024
• Traders are eyeing a bullish reversal with Tuesday’s inside day amid ongoing market volatility.
Natural gas takes a rest on Tuesday as it is trades inside day following yesterday’s retest of the 78.6% Fibonacci retracement. Today’s low of 2.325 along with yesterday’s 2.31 low are nearby support levels. A decisive decline below 2.31 will signal a likely further drop in the price of natural gas. Nevertheless, it is sitting in a potential support zone defined by the uptrend line, the 78.6% retracement, and the prior swing low at 2.235.
Decision Point Reached
If yesterday’s low is broken to the downside there is a good chance that support would be seen around the lower 2.235 price area. Downward momentum began off the recent swing highs and natural gas has fallen as much as 31.9% since then. And the 3.39 swing high was only nine days ago. This points to the strong possibility that the correction may be over for now, leading to a tradeable bounce. Nevertheless, if the 2.235 level is breached, natural gas next targets the 88.6% Fibonacci retracement at 2.14. It may then keep falling as key lower levels start at 1.61 from 2016 and 1.44 from 2020.
Bear Trend Well Intact
Let us keep in mind that the downtrend in natural gas remains well intact and a new bearish signal was generated on the breakdown from the rising trend channel in late-February and then again on the failure to hold above the lower channel line most recently. Further, natural gas is back below its 200-Day MA (blue) after failing to stay above it twice over the past few months. Such signs of underlying weakness in the price of natural gas puts a test of trend lows from around 1.97 to 1.94 on the table if prices further weaken.
Rally Above 2.31 Signals Strength
Today’s inside day provides a setup as a bullish reversal is indicated on an advance above today’s 2.45 high. Further confirmation of strength is shown on a rally above yesterday’s high of 2.31 and further confirmed on a daily close above that price level. Moreover, a bullish hammer candlestick pattern may be completed today. That would provide supporting evidence for the potential strength of an inside day breakout.
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Today's Futures Heat Map • Weakest: Bitcoin, Gasoline, Milk, Mexican Peso
By: Barchart | January 23, 2024
• Today's Futures Heat Map
Strongest: Lean Hogs, Pork Cutout, Lumber, Soybean Meal
Weakest: Bitcoin, Gasoline, Milk, Mexican Peso
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Oil inventories slump 6.7M Barrels last week: API
By: Investing | January 23, 2024
U.S. crude stockpiles fell more than expected last week, the API reported Tuesday, just as a recent cold snap swept across the U.S., disrupting production.
Crude Oil WTI Futures, the U.S. benchmark, traded at $74.53 a barrel following the report after settling down 0.5% at $74.37 a barrel.
U.S. crude inventories rose by about 6.7 million barrels for the week ended Jan. 19, compared with a build 483,000 barrels reported by the API for the previous week. Economists were expecting a decline of about 3.00M barrels.
The bigger than expected draw in weekly U.S. stockpiles followed weather-related supply disruptions, with production in North Dakota, the third largest oil producing state, with output falling by 250,000 to 300,000 barrels a day from 700,000 bpd a week ago, according to the state pipeline authority.
The API data also showed that gasoline inventories increased by 7.2M barrels last week, while distillate stocks fell by 245,000 barrels.
The official government inventory report due Wednesday is expected to show weekly U.S. crude supplies decreased by about 3M barrels last week.
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Halliburton (HAL) tops profit estimates, upbeat on overseas growth
By: Investing | January 23, 2024
(Reuters) - Halliburton (NYSE:HAL) beat quarterly profit expectations on Tuesday, helped by strength in its drilling and evaluation business, especially in overseas markets, sending its shares up more than 2%.
With a better economic environment and acreages internationally, oilfield services are setting their sights outside the United States to grow, with the North American segment dominated by higher efficiencies but fewer wells.
The company's international revenue was boosted by improved activity in the Middle East, in line with larger rival SLB, which beat analysts' estimates for quarterly profit last week.
"In 2024, we expect international E&P spending to grow at a low double-digit pace ... we believe the Middle East/Asia region will likely experience the greatest increases in activity with other regions closely behind," Chief Executive Jeff Miller said during a post-earnings call.
Though revenue from North America fell in the fourth quarter, the top U.S. fracking service provider said it expects strong business in the region in 2024 due to "stable levels" of activity and contracted nature of its portfolio.
"Halliburton has viewed NAM for a while as a cash flow machine and while activity is likely flattish it remains at elevated levels," said James West, a senior managing director at Evercore ISI.
However, he warned that "we do not expect the same amount of production growth in 2024 as the industry experienced in 2023."
Halliburton said it expects lower revenues in the first quarter on weather-related seasonality.
The company said it returned $1.4 billion of cash to shareholders in 2023 through stock repurchases and dividends, which represents over 60% of its free cash flow, and plans to return over 50% in 2024.
The Houston-based company's adjusted net income was 86 cents per share for the three months ended Dec. 31, higher than 80 cents expected by LSEG analysts.
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Energy Daily Market Movers (% Price Change)
By: Marty Armstrong | January 23, 2024
• Top Movers
AU - Queensland Base-Load Electricity Futures 13.18 %
NSW Baseload Electricity Continuous 6.04 %
NYMEX RBOB Gasoline Futures 3.46 %
NY Crude Oil Futures 2.06 %
London IPE Brent Crude Futures 1.91 %
• Bottom Movers
AU - Victoria Base-Load Electricity Futures 8.04 %
NY Natural Gas Futures 5.64 %
*Close from the last completed Daily
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Natural Gas Markets Continue to Drift Lower
By: Christopher Lewis | January 23, 2024
• Natural gas markets continue to look for reason to go higher, but at this point in time simply cannot seem to find any real traction.
Natural Gas Technical Analysis
Natural gas, as you can see, has kind of just hung out here during the trading session on Tuesday, as we don’t have any real drive to go higher, but at this point we have dropped enough to suggest that perhaps we are getting closer to the bottom. Now, that being said, the $2 level underneath is a major support level that I think we need to pay close attention to. If we break down below the $2 level, it would obviously be an extraordinarily negative turn of events, but I don’t think that will happen anytime soon.
The $2.50 level is an area that I think a lot of people will be paying attention to as it is essentially the middle of the overall consolidation range. If we turn around and rally, I think we could go looking to the $3 level, which obviously is a resistance barrier, extending to the $3.33 level. All things being equal, we have to pay close attention to the fact that natural gas is going to face a serious demand problems coming soon due to the fact that we are heading into spring.
After all, futures traders are getting ready to start trading the March contract. So, I think you’ve got a situation where we just don’t have enough time for winter out there to really push the market higher. I think we are trying to carve out some type of consolidation range between $2 and $3 and we’ll just have to see how that plays out. But right now, I just don’t see a whole lot of upward momentum. You know, you may be able to play the bounce, but it’s going to be more short-term range bound trading this year, I believe.
With all of this being said, you have to be very cautious with your position sizing, but I do think that you have an opportunity to use some type of range bound trading strategy in this market over the next several months, as we don’t really have any desire to go drastically higher, but sooner or later we are going to find a floor.
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Crude Oil Markets Pull Back From Short-term Ceiling
By: Christopher Lewis | January 23, 2024
• Crude oil markets have pulled back a bit from the recent ceiling, as it looks like we are continuing to build a case for upward pressure over the longer term.
WTI Crude Oil Technical Analysis
Crude oil markets initially tried to break out during the early hours on Tuesday but have given up some of the momentum. Crude oil is a very interesting market at the moment because it has been very choppy, but at the same time it looks like it’s trying to form some type of basing pattern in order to turn the overall attitude around. If that kicks off remains to be seen, but it certainly looks like there is a lot of stubborn buying pressure underneath.
However, there isn’t enough fundamental reasoning to go higher for a longer term move quite yet. With this being the case, the market is likely to continue seeing pullbacks, but those pullbacks are increasingly bought into. The WTI grade shows the $75 level as a major resistance barrier, but if we can break above there on a daily close, then I think the 200-day EMA gets targeted. Underneath, I see support at the $71 level and most certainly a bit of a floor at the $68 level.
Brent Crude Oil Technical Analysis
The Brent markets have also pulled back a bit and are also wrangling the 50-day EMA indicator. The $80.50 level seems to be a major resistance barrier above and we are shying away from it. However, I see a significant amount of support underneath at the $77 level, and then again at the $75 level. The absolute floor in the Brent market is closer to the $72 level.
Crude oil is going to be a very interesting market in 2024 because there are a lot of questions about supply and demand. There are attacks in the Red Sea that can disrupt supply, but at the same time, we are still producing about 3 million barrels more per day than needed, mainly due to drilling in the United States. So therefore, it bypasses all of those concerns around the world.
Having said that, if the Federal Reserve and other central banks around the world are going to continue to look to loosen monetary policy, that should increase economic activity and therefore drive up demand for petroleum.
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Directly Involved. The Energy Report
By: Phil Flynn | January 23, 2024
Oil prices are pulling back after hitting a month high on concerns about China’s economy overshadowing the growing risk to supply and a looming global supply versus demand deficit. Geopolitical risk versus financial risks continues to be the balance in this market as the US puts the blame squarely on Iran for the Houthi rebel’s act of war and the market weighs the fall-out from the Chinese financial crisis.
China’s real estate meltdown has held back oil as well as grains and silver. Reports that China thinking about a 2 trillion yuan ($278.53 billion), stabilization fund to buy shares onshore through the Hong Kong exchange link, so far have not impressed the market.
The AP is reporting that, “Iran is ‘directly involved’ in Yemen Houthi rebel ship attacks, US Navy’s Mideast chief tells AP. The Associated Press explains the details of the U.S.-led strikes that targeted Yemen’s Houthi rebels over their ongoing assault on shipping in the Red Sea. That raises the risk of a response at a time when the delays in Red Sea shipping will soon start to add to inflationary pressures as the shipping delay costs will start to hit consumers.
Reports that Libya’s oil production recovered to 1.2 million barrels a day are taking one risk factor off the table while other risk factors continue to be heightened.
One of the major factors in powering the US economy and reducing greenhouse gas emissions around the globe has been the exports of US liquefied natural gas. Climate extremists want to shut down natural gas at a huge risk to the global economy and a huge risk to the environment. Reuters reported last week that, “The Biden administration faces mounting pressure over whether to approve a massive new Louisiana LNG export project, with environmentalists saying the facility would undermine U.S. climate goals and business interests arguing it is essential for global energy security. The Federal Energy Regulatory Commission, a panel of three regulators, is expected to vote in weeks or months on approval of Venture Global’s Calcasieu Pass 2, or CP2, liquefied natural gas terminal (CP2) project.
This comes against a backdrop of continued warnings that the lack of investments in fossil fuels from OPEC and the American Petroleum Institute (API) and as the recent cold snap unmasks the fallacy of the Biden administration fantasy about the American economy being driven by all-electric cars and trucks. Bloomberg reported last week that API President Mike Sommers told industry officials and congressional staff that, “Washington is on the cusp of spoiling the American energy advantage, undermining it with short-sighted policies and hostility toward US oil and natural gas. OPEC warned late last year about “dire consequences” for the global economy if the world abandoned fossil fuels. Calls to cut out hydrocarbons, “set the global energy system up to fail spectacularly”, OPEC secretary general Haitham Al Ghais said. “It would lead to energy chaos on a potentially unprecedented scale, with dire consequences for economies and billions of people across the world,” he said.
Now some say that the Biden energy policies have not been a detriment to the US oil and gas industry as evidenced by record production and prices that have retreated from multi-decade highs. Yet that is short-sighted thinking and not backed up by those in the oil and gas industry.
Natural gas is trying to bottom after the post-polar plunge. Once again we are getting conflicting forecasts about the outlook for the rest of the winter. Some forecasters are predicting that we will see above-normal temperatures from here on out. Others are producing a return of the Vortex that will be more brutal than the last. Z4 Energy Research is reporting that after the polar blast, natural gas production recovered to 100.8 Bcfgpd on Monday according to BNEF.
Javier Blas at Bloomberg Is reporting that, “El Niño has peaked and temperatures in the central tropical Pacific “are now declining”, according to the Australian Bureau of Meteorology. Neutral levels are expected by June 2024.” So I guess that is climate change! OH NOOOOO! Wait! That means the climate may have been changing for millions of years. Hmmm…
Today we get the American Petroleum Institute report. We expect to see drawdowns in crude oil inventories as well as a big drawdown at the Cushing, OK delivery point. Products still may be up a little bit but we’re going to see the deficits start to continue. The numbers obviously are going to be skewered because of the impact on production because of the polar vortex. We continue to think that if you’re a user of oil products or natural gas, this is still an opportunity to put on the hedge.
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Oil prices retreat on supply concerns; central banks, economic data in focus
By: Investing | January 23, 2024
Oil prices fell Tuesday, handing back early gains as worries over rising supply countered continued Middle East tensions.
By 09:30 ET (14.30 GMT), the U.S. crude futures traded 0.7% lower at $74.22 a barrel and the Brent contract dropped 0.7% to $79.44 a barrel.
Crude production increases
The crude benchmarks slipped lower during Tuesday’s session amid uncertainty over several supply and demand indicators.
Norway's crude production rose to 1.85 million barrels per day in December, beating expectations as well as the 1.81 million barrels seen the previous month.
Additionally, production at the Sharara oilfield in Libya restarted at the start of this week after the end of protests that had halted output since early this month.
“The restart of the operations came after the local governments agreed to meet most of the demands from protestors,” said analysts at ING, in a note. “Crude oil production at the oil field stood at around 270Mbbls/d earlier.”
That said, severe cold weather means that supply remains constrained in the United States, with North Dakota’s pipeline authority estimating that oil production in the region was down around 250-300 million barrels a day as of Monday.
”The extreme cold weather in the US has also impacted refining operations in the country with around 15% of refining capacity in the Gulf Coast region reported to be offline as of last Friday,” said analysts at ING, in a note.
The weather-induced shutdowns over the last week could see a drop in crude inventories in Tuesday's American Petroleum Institute weekly report, due later in the session.
Middle East unrest provides support
Providing support for the crude markets remains the volatile situation in the Middle East, potentially hitting output from this oil-rich region.
The war between Israel and Hamas in Gaza rages on, and the U.S. and British forces carried out a second joint round of strikes on Houthi positions in Yemen on Monday night.
The Iran-backed Houthi militants have been threatening shipping in the Red Sea, a crucial artery for shipping between Europe and Asia.
Central banks, key economic readings awaited
The Bank of Japan maintained its ultra-dovish policy overnight, and attention now turns to the European Central Bank, which is expected to maintain its interest rates at high levels on Thursday.
Growing expectations of higher-for-longer U.S. interest rates also weighed on oil markets, especially as waning bets of early interest rate cuts by the Federal Reserve spurred strength in the dollar.
Focus is now on a string of key U.S. indicators due this week for more cues on the world’s largest economy. Fourth-quarter GDP data is due on Thursday and is expected to show some cooling in growth.
PCE price index data, Fed’s preferred inflation gauge, is due on Friday, and is expected to reiterate that inflation remained sticky through December, giving the central bank more impetus to keep rates higher for longer.
A string of purchasing managers index readings from several major economies are also due in the coming weeks, and are expected to show sustained weakness in business activity across the globe.
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Bullish RSI divergence into new 52-week lows for Exxon... $XOM Reversal incoming?
By: TrendSpider | January 22, 2024
• Bullish RSI divergence into new 52-week lows for Exxon... $XOM
Reversal incoming?
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Navigating Natural Gas: Unraveling Trends and Future Prospects
By: Bruce Powers | January 22, 2024
• Natural gas faces a critical juncture, testing support at 2.235 and signaling potential exhaustion. Traders await signs of strength amid heightened volatility for a decisive market move.
Natural gas falls hard once again, dropping to a new retracement low on a gap opening for the week. The recent swing low of 2.235 was tested as support with day’s low of 2.31. That was right around the 78.6% retracement of the full advance starting from the April 2023 swing low. Support was subsequently seen near the low, leading to an intraday rally. Natural gas is on track to close higher than the open and in the top half of the day’s range.
Might Gap Imply Exhaustion?
Certainly, the gap today may turn out to be an exhaustion gap signaling the end of the correction. However, we first need to see signs of strength. Nevertheless, downward momentum started five days ago. If natural gas falls further towards or below the 2.235 December swing low, it should run out of momentum before going much lower. The 88.6% Fibonacci retracement of the full uptrend comes in at 2.14. That would be a lower target if the December swing low fails to hold the decline.
Test of 200-Day Line at 2.67 Targeted Following Bullish Reversal
Given today’s relatively wide range, it wouldn’t be surprising to see an inside day tomorrow as natural gas continues to try and determine its next move. Until then a rise above today’s high of 2.47 shows demand increasing with a gap fill likely. That happens at yesterday’s low of 2.51. Assuming today’s low holds and is followed by a bullish reversal, a test of the 200-Day line as resistance around 2.665 looks to be a minimum likely advance. And it is quickly followed by the 38.2% Fibonacci retracement at 2.72.
Volatility Higher as Recent Swings are Over 30% Each
The trend in natural gas is down and lower price levels are at risk of being tested as support. Further bearish confirmation may be provided soon as the shorter 50-Day MA (orange) is about to drop below the 20-Day MA. However, if a rally comes in the next few days, it may not be able to stay below the 20-Day line. Volatility has picked up since the October 2023 high and we should expect it to continue into the near future. This means that the next rally may also have a wide swing. The price of natural gas has fallen by 31.9% in the current correction as of today low, while the prior two swings saw moves of 51.8% and 38.7%, respectively.
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oh does a 2 dollar jump...make you wanna sell naked ???
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