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The Edge. The Energy Report
By: Phil Flynn | March 11, 2024
The crude oil market has been edging lower reluctantly as banking worries and China’s economy and US regional bank concerns are raising demand fears even as global supplies tighten. WTI rejection of $80 a barrel has some wondering whether the move is over. Hedge funds are back, ramping up on the short side of the market trying to keep prices under control. Yet seasonal factors and geopolitical risk factors will keep the market from falling too hard.
Cease-fire hopes were dashed Biden issued a ‘red line’, warning Israel not to attack Rafah. Biden is trying to balance support for Israel against the screaming support for the Palestinians in his party. This is the latest attempt by Biden to appease the lefties in his base.
A pull-back in oil rigs and a cut in US oil investment will start to be felt as we head into the summer driving season and that normally will add 10 to 15 cents a gallon to the prices at the retail levels. This week we are looking for draws in gasoline and distillate as well as crude in a bullish trifecta and another weekly drop in US crude oil production.
China continues to be a source of speculation for the bears. Forget the fact that Chinese refinery reruns are at all-time highs, the state of the Chinese economy is a worry. China’s crude imports were viewed as mixed.
Yet Reuters reported that, “Saudi Aramco Chief Executive Amin Nasser said on Sunday the oil giant was looking at further opportunities to invest in China, where he said oil demand was robust and growing. State-owned Aramco has been ramping up its China presence in a string of deals in refining and petrochemicals, some of them with crude offtake agreements attached. “So far we are in the early part of 2024, demand is healthy and growing in China,” Nasser said on a media call following the release of results that showed net profit falling 24.7% to $121.3 billion on lower oil prices.
China imported 10.74 million barrels a day of crude oil during January-February of 2024 against 10.4 million barrels a day in the corresponding period of 2023, registering a growth of 3.3 percent. The Chinese Lunar New Year holiday and the travel associated with it helped crude oil consumption during these two months according to Hindu Times.
Reuters reported that U.S. energy firms this week cut the number of oil and natural gas rigs operating for the first time in three weeks, energy services firm Baker Hughes (BKR.O), said in its closely followed report on Friday. The oil and gas rig count, an early indicator of future output, fell by seven to 622 in the week to March 8, the lowest since Feb. 16. Baker Hughes said that puts the total rig count down 124 rigs, or 16.6%, below this time last year.
Natural gas is trying to bottom. The market is expected to see more production cutbacks. The announcement by EQT, the largest US natural gas producer, that said it would cut its production by 30–40 billion cubic feet (Bcf) through March 2024 seems to have given the markets a potential bottom and expectations of more production shut-ins.
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$WTI - Crude oil probably made a weekly cycle high last week when it topped at 81 on week 22 of this weekly cycle. The top isn't confirmed yet as it has to close below the 10 week MA to confirm it. Theoretically a higher high next week is still possible.
By: CyclesFan | March 9, 2024
• $WTI - Crude oil probably made a weekly cycle high last week when it topped at 81 on week 22 of this weekly cycle. The top isn't confirmed yet as it has to close below the 10 week MA to confirm it. Theoretically a higher high next week is still possible.
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WTI Crude Oil CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | March 9, 2024
• Following futures positions of non-commercials are as of March 5, 2024.
WTI crude oil: Currently net long 292.9k, up 18.3k.
The $81-$82 resistance proved too strong for oil bulls to win over. Last week, West Texas Intermediate crude tagged $80.85, closing at $79.97. This week, it ticked $80.67 on Wednesday to end the week down 2.5 percent to $78.01/barrel.
The crude remains bound within an 18-month range between $71-$72 and $81-$82. Last week’s was the first time in over three months the top of the range was tested, and it held firm.
With this, odds have grown of continued unwinding of the overbought conditions on the daily.
In the meantime, as per the EIA, US crude production in the week to March 1st fell 100,000 barrels per day week-over-week from record 13.3 million b/d. Crude imports increased 837,000 b/d to 7.2 mb/d. As did crude inventory, which grew 1.4 million barrels to 448.5 million barrels. Stocks of gasoline and distillates, however, declined 4.5 million barrels and 4.1 million barrels respectively to 239.7 million barrels and 117 million barrels. Refinery utilization increased 3.4 percentage points to 84.9 percent.
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NY Crude Oil Futures »» Weekly Summary Analysis
By: Marty Armstrong | March 9, 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. As of now, this market has been rising for 2 months going into March reflecting that this has been only still, a bullish reactionary trend. As we stand right now, this market has made a new high exceeding the previous month's high reaching thus far 8085 while it has not broken last month's low so far of 7141. Nevertheless, this market is currently trading below last month's close of 7826.
Up to now, we still have only a 2 month reaction rally from the low established during December 2023. We must exceed the 3 month mark in order to imply that a trend is developing.
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.
Focusing on our perspective using the indicating ranges on the Daily level in the NY Crude Oil Futures, this market remains moderately bullish currently with underlying support beginning at 7794 and overhead resistance forming above at 7808. The market is trading closer to the resistance level at this time. An opening above this level in the next session will imply that a bounce is unfolding.
On the weekly level, the last important high was established the week of February 26th at 8085, which was up 11 weeks from the low made back during the week of December 11th. Afterwards, the market bounced for 11 weeks reaching a high during the week of February 26th at 7584. Since that high, we have been generally trading down to sideways for the past week, which has been a sharp move of 4.118% in a reactionary type decline. Nonetheless, the market still has not penetrated that previous low of 6771 as it has fallen back reaching only 2755 which still remains -59.3% above the former low.
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 8085 made 1 week ago. Still, this market is within our trading envelope which spans between 6056 and 8972. The broader perspective, this current rally into the week of February 26th has exceeded the previous high of 7960 made back during the week of November 27th. This immediate decline has thus far held the previous low formed at 6771 made the week of December 11th. Only a break of that low would signal a technical reversal of fortune and of course we must watch the Bearish Reversals. Right now, the market is neutral on our weekly Momentum Models warning we have overhead resistance forming and support in the general vacinity of 7552. Additional support is to be found at 7256. From a pointed viewpoint, this market has been trading down for the past week.
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 March, this market has held above last month's low of 7141 reaching 7141.
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.
Natural Gas Finds Support, Eyeing Upside Targets
By: Bruce Powers | March 8, 2024
• Natural gas found support at the 50% retracement and 20-Day MA. Bullish signal will occur on rise above today’s high of 1.84.
It looks like natural gas found support today around the 50% retracement and 20-Day MA. Today’s low was 1.755 and you can see how it bounced right off the price zone. That may be the bottom of the retracement given that the 20-Day line was tested as resistance on Tuesday, February 27. If successful, today’s low would be the first successful test of the 20-Day MA as support then. A further bullish signal could lead to a test of the recent 2.01 swing high and higher targets.
Successful Test of Support at the 20-Day Moving Average?
Prior to February 38 natural gas had been below the 20-Day MA since the drop on January 18. Traditionally, once prior resistance is successfully tested as support in a developing uptrend, the uptrend, in this case a counter-trend rally, may be ready to proceed. If that is the case with natural gas a bullish signal will be generated heading into next week on a rally above today’s high of 1.84.
Highlighting 2.24 Price Target
If the rally from the 1.52 swing low continues into new trend highs, there are interim price levels to watch on the way up. However, the market seems to be highlighting the 2.24 price area as a potential target. There are three pieces of analysis pointing to that price area. The 50-Day MA has recently converged with the 38.2% Fibonacci retracement of the full decline starting from the January 9 peak and they converge at the support area seen at that 2.235 swing low from mid-December.
Nonetheless, to reach 2.24 natural gas will first have to rise above the recent high of 2.01 and then exceed potential resistance up to a second 38.2% Fibonacci retracement level at 2.04. Beyond the 50-Day MA is the 200-Day MA at 2.61. It can be combined with the 61.8% Fibonacci retracement at 2.68, generating a price zone from 2.61 to 2.68.
Weakness on Drop Below 1.755
Regardless of the above bullish scenario, a decline below today’s low of 1.755 could lead to a deeper retracement. The 61.8% Fibonacci retracement is at 1.71. It provides a price level to watch for signs of support on the way down if that scenario does unfold.
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Natural Gas Price Forecast: Potential Retracement to 1.76/1.70 Support Zone
By: Bruce Powers | March 7, 2024
• Natural gas faced resistance at 1.95 - 1.97, likely heading towards support at 1.76/1.70. Short-term patterns hint at a potential reversal soon.
Following an inside day breakdown natural gas enters a deeper pullback from the recent 2.01 trend high. That high stuck resistance around the long-term downtrend line and previous trend lows, now resistance at 1.95 – 1.97. The 8-Day MA did not show signs of support as natural gas fell right through it and looks to be on its way to the prior swing high at 1.79 and possibly lower.
Maximum Retracement Possible to 1.76
The next lower likely price support area looks to be around 1.76/1.77. The 50% retracement is at 1.755 and the 20-Day MA is at 1.70. That zone could be the maximum for this retracement. Certainly, that would be a spot for it to happen.
Short-term Pattern Stands Out
There is one short-term price pattern that stands out and may or may not mean anything. We’ll know soon. The first pullback from the 1.79 swing high begins with the open to close range of the day occurring within the body of the previous day. Let’s call it a partial inside day. Then there was one wide range accelerated decline seen as a full-bodied red candle. The low of that day turned out to be the completion of the retracement. Similarly, the recent 2.01 swing high was followed by an inside day. Now today, Thursday, there is a sharp retracement likely to end with a large red candle. Might we see something similar next?
Weekly Chart Analysis
One more piece of that analysis to add can be seen on the weekly chart (not shown). Given today’s decline, it is currently on track to end with a weekly bearish shooting star candlestick pattern. However, if today’s low turns out to be the low or close to the low of the retracement, and it is followed by bullish price action, the weekly candlestick pattern may not end as bearishly.
Watching Price Action Relative to 20-Day MA Closely
The reaction of price around the 20-Day MA should provide a clue about underlying strength that could support a advance higher. Or help determine if the recent high completed an ABCD counter-trend rally in a downtrend and the bearish sentiment remains dominant.
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Natural Gas Continues to Pull Back
By: Christopher Lewis | March 8, 2024
• The natural gas markets have pulled back a bit over the last couple of days, but during the early hours on Friday we have seen the market stabilized just a bit.
Natural Gas Technical Analysis
You can see that we are somewhat stagnant at this point as the market really ended up being pretty quiet overnight. That being said, I think we are still in the midst of some type of huge consolidation pattern, so it is a bit difficult to get overly aggressive one way or the other right now.
Regardless, this is a market that will continue to pay close attention to the $2 level, which I think will be a bit of a barrier. Breaking above that will attract a certain amount of attention, just as breaking below the $1.50 level would be very attention-worthy as well. Both of these areas have been important in the past, and now that we have sold off so viciously, I think we are in a pattern where we are just simply trying to sort out whether or not the market can turn things around from a longer term swing trade standpoint. Short term trading in the natural gas markets will continue to be very difficult, so therefore, I’m not overly excited about doing that. I look for dips and then add to an ETF position.
The reason I use an ETF is it takes a lot of leverage out of the picture and therefore I don’t have to worry about the day to day swing. If you’re looking to trade natural gas from a day to day standpoint, you are looking to wreck your account to begin with because it’s not really a retail type of short-term setup. But furthermore, you also have to be abreast of what’s going on with weather patterns in the Northeast in the United States. What most retail traders don’t know is that the natural gas contracts they are trading are the Henry Hub natural gas contracts, which are based on US domestic supply more than anything else.
Yes, exterior markets can have an influence, but right now the United States is starting to head into spring, which means demand drops, so I suspect we probably bounce around for quite some time. We may get the last ditch winter storm or we may get a heat wave in the middle of summer to drive up the price, that’s essentially what you’re banking on.
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Crude Oil Continues to See Buyers
By: Christopher Lewis | March 8, 2024
• Crude oil markets have pulled back a bit during the beginning of the week, only to turn around and show signs of life again. With this being the case, I think you continue to be a bit of a “buy on the dip” trader given enough time.
WTI Crude Oil Weekly Technical Analysis
The WTI crude oil market has initially fell during the week, but it did turn around to show signs of life again, suggesting that perhaps we have a shot at breaking much higher. The $80 level continues to be an area that a lot of people will be closely monitoring and if we can break the above, then I think we have a real shot at going much higher, perhaps as high as $95 over the longer term.
Obviously, there will be several stops along the way, but that is a possibility. Short term pullbacks continue to be buying opportunities and I do not see an opportunity to sell this market any time soon.
Brent Crude Oil Weekly Technical Analysis
Brent markets look very much the same as you would expect with the $84.50 level offering a bit of a barrier. If we can break above that barrier, then we could go much higher. I think at that point in time we’re probably going to be looking at a move towards 95 as well. Now, granted, this is probably a move that will take the better part of spring and summer to complete.
But as far as the technical analysis is concerned, that seems to be where we are heading. Furthermore, we also have to keep in mind that the market participants will look at this through geopolitical tensions, the supply issue, the fact that the Middle East is essentially having a lot of struggles right now, and therefore all of that geopolitical tension could threaten supply.
Beyond that, the cyclical time of year is typically very bullish as people start to drive more, fly more, etc. So, all of this comes together for higher oil prices in the next couple of months and I think both of these charts reflect that.
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OPEC Commitment. The Energy Report
By: Phil Flynn | March 8, 2024
We are getting a first look at OPEC’s commitment to its voluntary production cuts as US diesel crack spreads rise in response to tight supply. Cease-fire talks between Israel and Hamas failed when HAMAS rejected the terms. A disruption in the Keystone Pipeline gave oil a pop on supply concerns but its larger concerns about global oil supply tightness continue to raise concerns. Then oil dipped on a Reuters report that the head of the International Energy Agency’s (IEA) said the global oil market is relatively well supplied.
Record-breaking refinery runs in China suggest even with a big year-over-year drop in Chinese car sales, the IEA predictions about global demand were low and reports that China’s demand growth will slow due to a switch over to green energy might be less likely after a major Chinese oil discovery. China’s CNOOC discovered an s 100-million-ton oilfield in the South China Sea. While the Biden administration continues to put more burden and taxes on US oil and gas producers, I highly doubt China will stand in the way of the CNOOC development of these wells.
So committed is OPEC. The latest Platts OPEC+ survey by S&P Global Commodity Insights said that, “the 22-country alliance held its crude production exactly flat month-on-month in February. They said that OPEC pumped 26.58 million barrels a day (mil b/d) allies added 14.63 mil b/d. The said that Countries with quotas produced 175,000 b/d above their caps with Iraq, Kazakhstan being the biggest cheaters.
This came after Saudi Arabia, Russia, and several OPEC+ producers extended voluntary crude supply cuts until the end of June. And they are warning of a supply deficit if they extend cuts until the end of the year.
The Energy Information Administration confirmed what we already knew and that is that China broke refining records. The EIA wrote, “Crude oil processing, or refinery runs, in China averaged 14.8 million barrels per day (b/d) in 2023, an all-time high. The record processing came as the economy and refinery capacity grew in China following the country’s COVID-19 pandemic responses in 2022.
Weakness in the oil market today could be some preemployment report profit taking and geopolitical risk factors for oil continue to be very high. Reports that the United states is warning people there could be attacks on the US embassy and for all American citizens to leave Russia is also raising concerns in the marketplace today. US gasoline demand and diesel demand are going to rise and that’s raising concerns about the supplies being below average for this time of year. Industry insiders believe that if the Biden administration has the courage to follow through on Venezuelan oil sanctions, then the supplies of diesel are going be very tight.
Natural gas producers have major issues after winter failed to happen. Producers must cut back and those that will survive most likely will be hedged and based on data from the CME Group, many did. The CME Group wrote that, “In February 2024, warmer weather engulfed much of the US. The consistent record production levels coupled with reduced demand led to a decline in price throughout the month. Gas prices this month fell to an inflation-adjusted 30-year low to $1.50/MMBtu with inventory levels 20% above 5-year averages. Natural gas prices were at their 10-year lows, prices surged after the production cut announcement from Chesapeake in the Permian on February 21st. Before this announcement, the most actively traded strikes were between 1.5 and 1.75, during the rally, the most popular strike was 2.000. Traders continue to use the most liquid Henry Hub futures and options CME markets to manage risks. CME Henry Hub Natural Gas futures Avg. Daily Volume in February 2024 was 581K, up 17% YoY. Avg. Open Interest is 1.53M up 25% YoY. Henry Hub Options broke records in February with a new monthly average. Daily Volume record of 273K. Henry Hub Option’s single-day Open Interest is 4.7M, the highest it’s been since 2014.
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Energy Daily Market Movers (% Price Change)
By: Marty Armstrong | March 7, 2024
• Top Movers
AU - Victoria Base-Load Electricity Futures 2.6 %
London IPE Gas Oil Futures 1.9 %
NY Heating Oil Futures 1.73 %
NSW Baseload Electricity Continuous 1.37 %
NY Crude Oil Futures 1.25 %
• Bottom Movers
NY Natural Gas Futures 1.43 %
*Close from the last completed Daily
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Crude Oil Continues to See Volatility
By: Christopher Lewis | March 7, 2024
• Crude oil markets continue to be very noisy, and I think that is a sign that we are building up momentum in a market that is running out of time before we start to eventually breakout to the upside.
WTI Crude Oil Technical Analysis
You can see we continue to bounce around a bit as we try to sort out where we are going longer term. Either way, I do think this is a market that more likely than not will continue to see buyers on dips. And that’s how I treat it. The WTI market has a major barrier above the $80 level, which of course, is a large, round figure and an area that we’ve seen action at previously. So, it would obviously attract a lot of attention if we broke above there.
Underneath, we own the 200 day EMA and try everything you can to offer support. And if we were to break down below there, then the 50 day EMA comes into the picture as well for support. I have no interest in shorting WTI because I think we are about to see a big breakout.
Brent Crude Oil Technical Analysis
Brent is very much in the same situation as we hang around the 200 day EMA. The $84.50 level above is a significant barrier that if we can break above there then we can go much higher.
If we break down below here, then the 50 day EMA comes into the picture where we could see a lot of support as well. Again, this is a buy on the dip type of scenario. And I do think that you have to look at this through the prism of trying to find value. Supplies are somewhat tight and that, of course, will continue to drive oil higher if central banks start to loosen monetary policies that could drive up demand through economic expansion.
And then, of course, we have the cyclical time of year when more crude oil is demanded anyway. So all of this comes together quite nicely for a buy on the dip market, which I continue to buy on the dip. Again, I have no interest in shorting crude oil, and I do think that if we can break above the barrier just above in both of these grades, these markets could really start to take off.
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Cross Currents. The Energy Report
By: Phil Flynn | March 7, 2024
The possibility of a Fed rate cut along with tightening US crude oil supply and rising demand was enough to give WTI oil another run above $80 a barrel before banking concerns caused a retreat in a global oil market where geopolitical risk is red hot. Israel-Hamas ceasefire talks have gone nowhere and the Iranian-backed Houthi rebels who sunk their first ship now have their first murder as they killed at least three crew members on a commercial ship in the Gulf of Aden. Also there are reports of a refinery explosion in Iran. New York Community Bancorp, in the city that doesn’t sleep and where Gov. Kathy Hochul must call in the National Guard to keep the subways safe, received $1 billion from a group of investors including former Treasury Secretary Steven Mnuchin, in a bid to shore up confidence in the troubled regional lender according to the Wall Street Journal. That seemed to shake the stock market just a bit and oil even as gold, silver platinum, and palladium soared. Big drops in US distillate and gasoline supply on a pick weekly uptick in gas and diesel demand should start to concern consumers.
The Energy Information Administration warned that reduced U.S. refining activity has put upward pressure on prices as U.S. refinery utilization has decreased by 11%, falling as low as 81% during the last two weeks dropping briefly below the five-year. Even as the U.S. retail average prices for gasoline and diesel are below 2023 prices. That is because oil prices have been low due to rising US oil and gas production, which was caused by US oil company innovation and not by any help from the US government. US oil production dipped back last week, and many US oil producers are fearing that Biden’s methane taxes force many US oil producers out of business leading to a sharp decline in US oil production.
The Methane Tax was created in 2021 and tucked into the so-called Inflation Reduction Act (IRA) that failed to reduce inflation and actually had the opposite effect. Now it’s doing the same thing with methane emissions as the EPA expects it will just make products cleaner but in reality, will force producers out of business and give more market share to foreign producers who will no doubt pollute more. The tax started in 2024 at $900 per metric ton of methane released above the regulatory threshold of 25,000 metric tons of carbon dioxide equivalents per year. The fee increases to $1,200 in 2025 and $1,500 in 2026 and beyond. The drillers are warning that as the taxes rise the US production will fall. That will help OPEC and Russia.
This comes as the Biden administration looks to try to tighten sanctions on Russia but may turn a blind eye to Venezuela which failed to live up to its agreement to run a free and fair election. I know you are shocked. I mean if you can’t trust a guy like Venezuelan President Nicolás Maduro, who can you trust? Reuters is reporting that Chevron is back to drilling in key Venezuelan oil fields as the company plans to drill as many as 30 wells in production boost production even as Biden threatens more sanctions. Apparently, like the rest of the world, Chevron must not take threats from the Biden administration too seriously. Just Don’t.
The Energy Information Administration has warned that reduced U.S. refining activity has put upward pressure on prices as U.S. refinery utilization has decreased 11%, falling as low as 81% during the two weeks ending February 9 and February 16, and briefly dropped below the five-year (2019–23) low. Although U.S. retail average prices for gasoline and diesel are below 2023 prices for this time of year, decreasing regional inventories for the major U.S. refining regions increased retail prices for both fuels last month, according to our Gasoline and Diesel Fuel Update.
The sharp decline in refinery utilization is the result of reduced plant operations in both the Midwest and Gulf Coast regions and more intense seasonal patterns. The decline is also affecting inventories. Reuters reported that, “One of Turkey’s mid-sized Mediterranean oil terminals – the Dortyol terminal – will no longer accept Russian imports after receiving record volumes last year, amid an increase in sanctions pressure by the United States. Turkey has become one of the biggest importers of Russian crude and fuel since 2022, after the West imposed sanctions on Moscow for the invasion of Ukraine. Russia responded by re-routing oil away from Europe and the U.S. to Asia, Turkey and Africa.”
China’s oil demand remains strong. Argus Media reported that China’s Jan-Feb crude imports rose by 3pc from a year earlier on the back of firm demand before the Lunar New Year holiday. Crude imports during the first 2 months averaged 10.74 million barrels a day.
Reuters is reporting that, “At least two people were injured in an incident during a maintenance operation at the Aftab oil refinery in Iran’s Bandar Abbas, Iranian state media outlets reported on Thursday, citing the operating company. Earlier, the Iranian state news agency IRNA said several people had been killed and injured due to an accident there, but cautioned there had been no official statement. Several state media outlets later described it as a “partial incident that happened during a maintenance operation”, without giving details of what that entailed, and said there were at least two injured, with no mention of any dead.
The EIA put U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.4 million barrels from the previous week. At 448.5 million barrels, U.S. crude oil inventories are about 1% below the five-year average for this time of year. Total motor gasoline inventories decreased by 4.5 million barrels from last week and are about 2% below the five-year average for this time of year. Both finished gasoline and blending components inventories increased last week. Distillate fuel inventories decreased by 4.1 million barrels last week and are about 10% below the five-year average for this time of year.
The natural gas drama can continue as the market tries to balance the potential for more US production declines versus the possibility of more of a glut if demand doesn’t materialize. The long-term impact of LNG pauses on projects will be a problem for the market as it needs investors to keep the US viable is upping their LNG exports facilities.
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Natural Gas Faces Resistance from Where it May Breakout or Retrace
By: Bruce Powers | March 6, 2024
• Natural gas consolidates near highs, testing key resistance zones. A breakout above 2.01 encounters the next potential resistance zone from 2.02 to 2.04.
Natural gas consolidates near highs with an inside day today, Wednesday. It continues to show strength as it has been testing a key near-term resistance zone for the past several days. The price zone ranges from around 1.95 to 2.01. It includes the long-term downtrend line and prior trend lows from February and April 2023. Two Fibonacci levels mark the next higher potential resistance zone from 2.02 to 2.04. What this indicates is that a breakout above 2.01 may quickly hit another zone of resistance. Moreover, natural gas may break right through the Fibonacci price zone and continue higher.
Watching for Further Signs of Strength
A sign of weakness is shown in the recent daily closing prices as there has yet been a decisive close above the low of the first zone at 1.95 or the downtrend line. If that happens, it will further confirm the strength indicated by the rally so far. What happens next though will be important. A daily close above 1.95 by itself is not a reliable signal. But once there is a decisive daily close above 2.01 the chance for a continuation higher improves slightly, and then more so on a move above 2.04.
8-Day Moving Average Provides Dynamic Support
The 8-Day MA crossed above the 20-Day MA reflecting strength in the current advance. It will also mark key dynamic support level for the rally. It is currently at 1.85. A drop to test support of the 8-Day line becomes more likely if there is a drop below today’s low of 1.92. However, a drop below the two-day low at 1.89 is going to provide a clearer sign of short-term weakness. Other price levels to watch for possible support if a pullback from this week’s high occurs is the prior swing high at 1.92 (B) and the 20-Day MA at 1.78.
Remains in Long-term Downtrend
Although we have seen short-term strength recently in natural gas it remains in a long-term downtrend. Rallies can be expected to encounter resistance around prior key price levels. The dominant downtrend may again exert its control over price action leading to either an eventual continuation of the downtrend or at least further tests of support levels.
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OPEC’s Long Game. The Energy Report
By: Phil Flynn | March 6, 2024
While the United States has embarked on self-defeating and short-sighted energy policies, it appears that the OPEC long game led by Saudi Arabia is starting to pay off. After the Saudis engineered an extension of the OPEC and Russia production cuts as well as promises of compensation cuts by cheating producers, they now feel confident enough to raise prices sharply as US energy producers are signaling retreat. Saudi Aramco raised the official selling price for their coveted Saudi Aramco Arab Light by $0.20 per barrel over the Oman/Dubai average, putting April deliveries up $1.70 per barrel more than the Oman/Dubai average, up from $1.50 per barrel this month. S&P Global reported that, “Europe was the only slow-demand part of the world.” More and more, OPEC will profit off of that demand while the US oil production growth is expected to go into retreat.
This Saudi price increase comes at the same time the American Petroleum Institute (API) reported that US petroleum supplies were tighter than market expectations. This could signal the start of a trend of tightened supply that could keep prices of gas and diesel high even on reports that the BP working refinery may be back online giving the Midwest some pump price relief.
The API reported crude oil inventories rose by 423,000 barrels much less than the 2.6-million-barrel build expected. The API said gas inventories fell this week by 2.8 million barrels, after a 3.272-million-barrel inventory drop last week and are about 2% below the five-year average for this time of year. Distillate inventories also fell this week, by 1.8 million barrels and are about 8% below the five-year average.
US foreign policy also does not seem to be making oil transit safer. A report from a source called the ‘Iran Observer” claimed that Iranian naval forces seized a US oil tanker in the Gulf of Oman.” If true that would add more risk premium from the axis of risk premium, the country of Iran that has been the main driver of oil risk premium. Iran spent its recent oil fortunes they have received because of lax sanctions enforcement by the Biden administration on supporting Hamas Hezbollah and those pesky Houthi Rebels that finally sunk their first ship last week.
Al Arabiya reports that, “Iran will unload about $50 million worth of crude from a Marshall Islands-flagged tanker seized last year, the semi-official Fars news agency reported on Wednesday, in a tit-for-tat action against the United States. Advantage Sweet is a Suezmax crude tanker that had been chartered by US firm Chevron and was seized in April 2023 by Iran’s army following an alleged collision with an Iranian boat.
While those in the oil industry started to worry about the decline rate from lateral wells, the Energy Information Administration has touted the success of the US oil and gas industry that was made by innovation by private companies and not the government. The Biden administration points to rising US oil production as a sure sign that their anti-fossil fuel agenda is having no impact on prices even as US consumers bear the brunt of these self-defeating policies. This is an administration that was against US oil and gas before they were for it and again against it, depending on who they are talking to. It is never their policies that are to blame, it’s either the oil companies or the food companies but they are first in line to take credit for the work of the US oil and gas industry. You know, the price gougers and war profiteers as Biden calls them. Yet despite the vitriol and indignities, the US oil and gas industry has had to take from this hostile administration, they continue to shine with innovation that gives hope to the world.
The EIA writes about that success by saying that, “U.S. crude oil production averaged 13.3 million barrels per day (b/d) in December 2023, following sustained productivity increases at new wells, according to our latest Petroleum Supply Monthly (PSM). U.S. crude oil production has increased to record highs since 2010 and has risen even more quickly in recent months. These record highs have come despite declining U.S. drilling activity because the new wells are more efficient. Since first surpassing the previous record in August 2023, U.S. crude oil production has increased another 2%, exceeding the pre-pandemic November 2019 peak by 0.3 million b/d.
The number of new wells brought online by drilling activity has historically been the key determinant of whether crude oil production increases or decreases. However, advances in horizontal drilling and hydraulic fracturing technologies have increased well productivity, enabling U.S. producers to extract more crude oil from new wells drilled while maintaining production from legacy wells according to EIA.
Yet last year’s US shale oil production growth rate is expected to slow significantly. If true that would ensure that we head into a supply deficit later in the year. More stimulus in China as well as expected future rate cuts by the Fed should feed a surge in global oil demand as well. Industry insiders say that the uncertain investment environment is making it more risky to continue to invest in shell wells new legislation better by the ministration to round the methane releases and other regulations that are being proposed could sharply curtail investment and drilling in the US oil and gas sector.
That is making Crown Prince and Prime Minister of Saudi Arabia Mohammed bin Salman Al Saud’s supply management campaign a success at the expense of consuming nations’ interests, while the US and Europe have made some ridiculous decisions in the name of green energy and saving the planet. Saudi Arabia and Russia stayed focused on global energy needs and the fossil fuel realities giving them huge advantages as we move into an era of petroleum markets woefully underinvested in for our future.
You know $80.00 for oil in the short term could see some resistance yet the monthly charts are looking very bullish for a potential move to 90 within the next couple of months. Oil products also are under-supplied and it’s going to be very interesting to see if the market is going to be able to keep up with demand at these price levels prices. More than likely the market is going to have to rise fairly significantly to keep up with demand.
Natural gas is balancing cutbacks in production versus warm weather as well as the uncertainty created by the Biden administration as far as LNG exports based upon his study of its impact on the environment.
EBW Analytics reports that rapidly falling production scrapes are down 3.0 Bcf/d over the past four weeks, including EQT’s announcement of its own 1.0 Bcf/d of curtailments for March. Still, exceptionally mild March weather may drive surging storage surpluses to add 175 Bcf vis-à-vis the five-year average. Including Canada, North American surpluses may reach a staggering 900 Bcf above five-year normals. Bullish technical and tremendous outstanding speculator shorts offer further upside price risks in the near term. Fundamentally, however, a sustained period of low prices this spring may be needed to support elevated electricity coal-to-gas switching and keep curtailed producer volumes out of the market.
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Natural Gas Advance Stalls at Key Resistance Zone
By: Bruce Powers | March 5, 2024
• Natural gas continues its uptrend with higher lows and highs, but weak closes signal resistance at 2.00 and potential for further gains if it exceeds 2.01.
Natural gas is set to complete another day with a higher low and higher high as the uptrend progresses. At the same time, the close on Wednesday following a new trend high was weak, in the lower half of the day’s trading range. A similar situation may be developing today, Tuesday, as a new trend high was hit. But the closing price is setting up to be weak, in the lower half of the session’s price range. Resistance was seen off the day’s high of 2.00.
Previous Trend Lows and Downtrend Line Mark Resistance Zone
Today’s price action highlights a key near-term price zone of interest as two lines of some significance are marking the current resistance zone. There are two horizontal lines representing the previous trend lows from a year ago from 1.95 to 1.97. And the long-term downtrend line that begins from the August 2022 peak marks a similar price zone. Notice that on each of the past two days the closing price was below resistance represented by the trend line. So, the next positive sign for the bulls is a close above the trendline.
Rise Above 2.04 Needed for Indication Natural Gas May Keep Rising
The new trend high is 2.01, just shy of the next higher likely resistance zone from 2.02 to 2.04. If the 2.04 high is exceeded and price keeps rising, and then closes above the downtrend line, higher targets become more likely to be reached. Notice the declining blue dotted parallel trend channel on the chart. It currently represents potential resistance, and it is going through the next resistance zone starting from 2.02 and therefore identifying a similar price zone. Two Fibonacci levels identify the zone, starting with the completion of a rising ABCD pattern extended by the 161.8% Fibonacci ratio at 2.02. The 38.2% Fibonacci retracement level is at 2.04.
Keeping the weekly chart in mind. A bullish reversal was triggered last week, and this is the second week where the price of natural gas rose above the prior week’s high. It wouldn’t be surprising to see at least three weeks up before the rally runs out of steam, or an inside week rest before continuing higher.
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Energy Daily Market Movers (% Price Change)
By: Marty Armstrong | March 5, 2024
• Top Movers
NY Natural Gas Futures 4.41 %
ICE Newcastle Coal Continuous 3.01 %
AU - Victoria Base-Load Electricity Futures 0.15 %
• Bottom Movers
London IPE Gas Oil Futures 2.45 %
NY Crude Oil Futures 1.54 %
NY Heating Oil Futures 1.35 %
NYMEX RBOB Gasoline Futures 1.1 %
London IPE Brent Crude Spot 0.9 %
*Close from the last completed Daily
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Tangled Web. The Energy Report
By: Phil Flynn | March 5, 2024
Are inaccurate reports of global oil, supply and demand starting to catch up to the global oil market? Oil prices have been creeping higher as the market structure has priced in supply tightness based on the previous forecast by the International Energy Agency and the Energy Information Administration (EIA) should be happening. Even today the market seems underwhelmed with China’s 5% growth target and its promised stimulus. The reality is that Chinese oil demand has been much better than previously reported as has been US oil demand despite the naysaying by many.
The EIA reported that despite talk of sup-par Chinese demand, we saw Chinese refinery runs hit a record high. The EIA says that China averaged 14.8 million barrels per day (b/d) in 2023, an all-time high.
In the US, the EIA also said that US domestic fuel consumption reached 20.23 million barrels a day last year, the highest level since 2019. Some of that Chinese record refining was done with the US Strategic Petroleum Reserve and Russian oil. The key thing is that these reporting agencies have consistently underestimated demand and overestimated supplies. The problem with these bad predictions is that it caused a false sense of security in the oil market. It also lead to a lack of investment in oil and gas and is starting to become a major issue because on the uncertainty surrounding the data as well as the uncertainty surrounding energy policy from the Biden administration.
While oil seems to be disappointed with the Chinese news as far as their growth targets, the reality is it’s very, very bullish. We expect that the demand in the United States and the rest of the world will exceed expectations and not only will we see record demand for oil we’re going to see a market that’s going to be undersupplied in the second-half of the year. More and more the futures spread seems to be suggesting the same thing.
For many years I have been openly critical of the Energy Information Administration and their lack of focus about energy security and their constant shilling for the green energy lobby. Big green money has done significant damage to the supply side of the market. Once again we see signs that this green energy dream is based on moving money and controlling people rather than it is on saving the environment. As we have stated before and now is getting a lot of press, is the fact that electric cars that the Biden administration has been trying to force down the throats of Americans are not any cleaner and do more damage to the environment than that good old-fashioned internal combustion engine. Of course, we’ve known this for many, many years and we continued to talk about it. But we’ve got to stop the madness and come back to reality. The reason why that is so critical is that the average person gets hurt by these silly anti-energy policies.
Now the other crazy thing that the Biden administration did was release oil from the Strategic Petroleum Reserve. They put no restrictions on who could buy our SPR oil. China of course became one of the biggest buyers of US Strategic Petroleum Reserve oil. Now a classic government attempt to shut the barn door after the horse has escaped, they are now trying to ban China from buying oil from the Strategic Petroleum Reserve. Good luck with that.
Reuters reported that, “A measure in the U.S. funding legislation unveiled by congressional leaders on Sunday would block China from buying oil from the Strategic Petroleum Reserve. The desire for a hard line on China is one of the few truly bipartisan sentiments in the deeply divided U.S. Congress, and lawmakers have introduced dozens of bills seeking to address competition with China’s government. The issue of SPR sales to China heated up after President Joe Biden, a Democrat, announced in 2022 a sale of 180 million barrels of SPR oil to tame gasoline prices that spiked after Russia invaded Ukraine. Maybe they should ask for the oil back?
The markets are getting a little bit of a pullback too on concerns about what the Federal Reserve speakers will talk about. The speakers could push the market down a little bit but if they sound a bit dovish, oil could soar.
Natural gas is getting new life as producers start to slowly cut back on output with pledges by the biggest natural gas producers. The key thing is whether the market believes that we’re going to cut back supplies enough to avert a major supply glut. Today the market seems to be suggesting the production may be enough but it’s going to be a day-to-day thing. As we said before, we still like the back end of the curve when it comes to natural gas options.
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Natural Gas Price Forecast: Bullish Momentum in Natural Gas Continues
By: Bruce Powers | March 4, 2024
• Natural gas prices surged, exceeding previous highs and aiming for 2.02, driven by underlying strength and demand, with potential for further gains towards 2.23.
Natural gas continued its ascent on Monday, triggering a bullish trend continuation signal on a rally above last week’s high of 1.92. The high of the day was 1.99 at the time of this writing. That put natural gas above the previous trend lows from February 2023 at 1.97 and April 14 at 1.95, which was a potential resistance area. A daily close above 1.97 would confirm strength. However, it is starting to look like natural gas may not be able to close above 1.97 today, as an intraday pullback has taken it below the 50% level of the day’s trading range.
Next ABCD Target at 2.02
The 127.2% Fibonacci extended target for a rising ABCD was reached today at 1.92 and quickly exceeded. Subsequently, the 161.8% Fibonacci extended ABCD target is at 2.02. And that target is a little below the 38.2% Fibonacci extension at 2.04. Together, they represent the next higher potential resistance zone.
Traders Likely to Engage on Weakness
There was a quick one-day pullback on Friday following last week’s high of 1.92. Today, there was a clear bullish follow-through. Such a quick bullish continuation after only a one-day pullback is a sign of underlying strength/demand. It may indicate that this bounce/rally is not yet complete. Therefore, traders are likely to use short-term weakness as an opportunity to add or enter positions.
An advance above today’s high signals a bullish continuation of the trend. As noted above, the next higher target zone would then start at 2.02. If the 2.04 price level is exceeded to the upside natural gas should next head towards the end of a gap around 2.17, followed by 2.23 and 2.31, assuming it can keep rising.
Weekly Bullish Signal
It is important here to keep in mind the weekly time frame chart. Last week a bullish reversal triggered and was confirmed by last week’s close above 1.79. Today’s price action triggered a continuation of that bullish reversal on a rally above last week’s high of 1.92. A daily close above 1.92 will confirm strength and then further still if this week’s ends above that price level.
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Commitment. The Energy Report
By: Phil Flynn | March 4, 2024
One of the biggest challenges in the global oil market in recent years has been the commitment between OPEC and Russia to try to work together to support global oil prices. For OPEC to learn lessons, it usually takes a catastrophic mistake like a major price crash for them to get the message and change their ways. In the United States, a lack of commitment to US oil and gas production could teach us a lesson with a major price spike. Oil and gas industry leaders warn that US policies are planting the seeds of the next energy crisis. Even Warren Buffet is talking about the steep decline rates in US shale production that could see US oil production peak and give even more economic power to Russia and the OPEC cartel. Yet at the same time, he is making oil and gas a forever play in his portfolio as he touts the ability of the US oil and gas industry, mainly Occidental Petroleum, to beat the odds by tapping on rock to get oil and gas.
In the 1970s, no one realized how the Arab oil embargo would backfire on them. That move and threat to the global economy forced the world into energy efficiency that never would have happened if it weren’t for the threat that OPEC would cut off their supply. Because of that, the oil demand peaked, and it took decades for global demand to surpass the glory days before the Arab oil embargo. More recently Russia and OPEC learned that if they decided to go to war together and try to outproduce each other, it could lead to a price crash as it did just a few years ago and that epic price crash saw the price of oil trade below $0 per barrel and WTI in the United States.
While those memories are fresh in mind and with the economic outlook sending mixed signals to the cartel, they have decided to act decisively and definitively to try to stay committed to their current voluntary oil output cuts of 2.2 million barrels per day and committed to reigning in their overproduction. Russia also agreed to cut oil production and exports by an additional 471k bpd for the second quarter of 2024. Iraq and Kazakhstan also vowed to compensate for their previous overproduction. In other words, they could cut production more than their quota to make up for their previous cheating. A move that will leave the globe more undersupplied and create a floor for prices going into the end of the year.
This comes against a backdrop where the head of the US industry trade group the American Petroleum Institute Mike Summers warned 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.” This hostility, along with the fact that there is uncertainty as far as investment, is causing concerns that we could see U.S. oil and gas production top out. That of course makes it a pretty darn good investment. The Oracle of Omaha Warren Buffett is making major investments in the energy space. Buffett points out that there is extreme value in the space but at the same time, is warning about the decline rate of current wells which could make the US energy production levels scarcer in the years ahead.
Buffet’s famed Berkshire Hathaway owns 27.8% of Occidental Petroleum and says that, “the company is “doing the right things for both its country and its owners” by helping to free the U.S. from reliance on imported oil. He says that Berkshire plans to hold the stock in the company “indefinitely”. He said, “No one knows what oil prices will do over the next month, year, or decade,” But the Occidental CEO Vicki Hollub does know how to separate oil from rock, and that’s an uncommon talent, valuable to her shareholders and her country.”
Buffet said “Not so long ago, the U.S. was woefully dependent on foreign oil, and carbon capture had no meaningful constituency. Indeed, in 1975, U.S. production was eight million barrels of oil equivalent per day (“BOEPD”), a level far short of the country’s needs. From the favorable energy position that facilitated the U.S. mobilization in World War II, the country had retreated to become heavily dependent on foreign – potentially unstable – suppliers. Further declines in oil production were predicted along with future increases in usage.”
Buffet went on “And then – Hallelujah! – shale economics became feasible in 2011, and our energy dependency ended. Now, U.S. production is more than 13 million BOEPD, and OPEC no longer has the upper hand. Occidental itself has annual U.S. oil production that each year comes close to matching the entire inventory of the SPR. Our country would be very –very – nervous today if domestic production had remained at five million BOEPD, and it found itself hugely dependent on non-U.S. sources. At that level, the SPR would have been emptied within months if foreign oil became unavailable.”
Of course, from the larger issue, it makes you wonder why the United States is turning away from such a valuable resource. Warren Buffett realizes that the goal to reduce greenhouse gas emissions is going to be built on the backs of natural gas. There is no other energy source that can replace coal and reduce greenhouse gas emissions better than natural gas and nuclear. Alternative energies, while they are part of the solution, are in no way able to replace the volume of demand that the globe. Sometimes it takes good old-fashioned common sense like Warren Buffett’s approach to realize the best direction forward.
As far as the crude oil market, this morning they got their traditional pop and drop on the OPEC news. Yet make no mistake about it the move by OPEC is going to work prices going forward. Use the opportunity to buy breaks and make sure that you get hedged because this summer it’s going to get very interesting. There are going to be some interesting spread opportunities coming up in the next few weeks. Probably time to start looking at some options in place as well as some of the seasonal spreads.
Natural gas is getting a little bit of a bounce this morning not so much on the weather but on the growing threat to US natural gas production, and low prices. This morning it was announced that EQT Corporation, the world’s largest producer of natural gas, is going to cut production in response to the low price environment. They expect cut gross output by one BCF a day to March in 30 to 40 BCF down the road. EBW Analytics writes that production scrapes are falling faster and—at least so far—more durably than anticipated. If supply continues to turn lower, it could set natural gas up for a notable move to the upside as the weather backdrop transitions in a less bearish direction into late March.
This comes as Qatar announces that they are going to sharply increase its liquefied natural gas production trying to take advantage of the United States’ pullback. Qatar and its desire to gain market share not only from the United States but also from coal producers as they plan to increase their LNG production by 85% in the coming years. Javier Blass at Bloomberg reports that the energy transition will eventually be a 0-sum game for one energy source to win the other one must lose. Blass says the obvious battle is between renewables and fossil fuels. Still, he also believes that there is a bigger battle between natural gas and coal fighting for supremacy. The problem Blass points out is that coal has been dirt cheap. Countries such as Bangladesh, Pakistan and Thailand once preferred LNG. It’s a not-too-difficult and not-too-expensive way to decarbonize or have second thoughts. Qatar wants to try to squeeze out coal to get a better grip on supplying the world with energy. The reality is that natural gas is going to play a major role and Qatar is going to try to control as much of the marketplace as they can.
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Crude Oil Continues to See Bullish Pressure
By: Christopher Lewis | March 4, 2024
• Crude oil markets continue to see a lot of noisy behavior, but at the end of the day both grades that I follow do look very bullish, and at this point I think we will eventually have some type of big breakout to the upside.
WTI Crude Oil Technical Analysis
The crude oil market pulled back slightly during the trading session on Monday, but still looks pretty bullish overall. The WTI crude oil market sees a significant resistance barrier in the form of $80, and it has been probed. At this point, I think it’s probably only a matter of time before we break out above there. When we do, it’s probably going to be very violent.
Short-term pullbacks should see the 200-day EMA underneath as potential support, and breaking down below there opens up the possibility of a move down to the 50-day EMA. But either way, I think both of those are going to be very difficult to break below. So, I think you have a continued buy-on-the-dip circumstance. That’s probably going to be the case for the foreseeable future in this market.
Brent Crude Oil Technical Analysis
The Brent market looks very much the same, its barrier being the $84.50 level. The $84.50 level is an area that we have seen a lot of trouble in, but if we were to break above there, it frees the Brent market to go much higher. The 200-day EMA and the 50-day EMA both are sitting underneath end offer and support as well, but at this point in time, both crude oil grades that we follow look as if they are forming inverted head and shoulders, or maybe a rounded bottom pattern.
Keep in mind we are heading into the time of year when demand picks up and of course supply has been so tight recently. Furthermore, we have to keep in mind that there’s a lot of trouble in the Middle East that could continue to keep prices somewhat higher. With that being said and central banks around the world looking to cut rates, demand should pick up in the next few months and therefore I think you’re seeing the market start to price that in.
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$WTIC $OIL - I am still mindful of a Bear 'Flag' within this Dn/Trend Channel unless negated
By: Sahara | March 4, 2024
• ... $WTIC $OIL - I am still mindful of a Bear 'Flag' within this Dn/Trend Channel unless negated.
Wkly Ivory 11/EMA could be considered spprt...
Nutty-Natty may still have one more swipe lwr tho, as it didn't reach my final target& Lwr-Parallel...
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$NATGAS #energy - Update.
By: Sahara | March 4, 2024
• $NATGAS #energy - Update.
These charts have kept us out of this commodity unless short.
Nutty-Natty may still have one more swipe lwr tho, as it didn't reach my final target& Lwr-Parallel...
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WTI Crude Oil CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | March 2, 2024
• Following futures positions of non-commercials are as of February 27, 2024.
WTI crude oil: Currently net long 274.5k, up 36.8k.
With the daily now looking to unwind its overbought condition, West Texas Intermediate crude unsuccessfully tested the upper bound of a 17-month range between $71-$72 and $81-$82. This was the first time in over three months the top of the range was tested, and it held firm, with Friday tagging $80.85 intraday and closing at $79.97/barrel, up 4.6 percent for the week.
The crude remains just above the 200-day ($77.72). Friday’s session high also kissed the daily upper Bollinger band. A loss of the average in the sessions ahead opens the door toward the lower band.
In the meantime, as per the EIA, US crude production in the week to February 23rd remained unchanged week-over-week for four weeks in a row at 13.3 million barrels per day, which is a record and was first hit in the week to December 15th. Crude imports decreased 269,000 b/d to 6.4 mb/d. As did stocks of gasoline and distillates, which respectively declined 2.8 million barrels and 510,000 barrels to 244.2 million barrels and 121.1 million barrels. Crude inventory, however, grew 4.2 million barrels to 447.2 million barrels. Refinery utilization increased nine-tenths of a percentage point to 81.5 percent.
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Two weeks ago we turned bullish on $USO and $XLE. We remain Bullish as both continue to look strong by moving higher and breaking above resistance. Upside targets remain in effect as long as they stay above the 200d SMA and Ichimoku Cloud
By: Intelligent Investing | March 1, 2024
• Two weeks ago we turned bullish on $USO and $XLE. We remain Bullish as both continue to look strong by moving higher and breaking above resistance. Upside targets remain in effect as long as they stay above the 200d SMA and Ichimoku Cloud.
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NY Crude Oil Futures
By: Marty Armstrong | March 2, 2024
NY Crude Oil Futures closed today at 7997 and is trading up about 11% for the year from last year's settlement of 7165. At the moment, this market has been rising for 2 months going into March reflecting that this has been only still, a bullish reactionary trend. As we stand right now, this market has made a new high exceeding the previous month's high reaching thus far 8085 while it has not broken last month's low so far of 7141. Nevertheless, this market is still trading above last month's high of 7962.
Up to now, we still have only a 2 month reaction rally from the low established during December 2023. We must exceed the 3 month mark in order to imply that a trend is developing.
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.
From a perspective using the indicating ranges on the Daily level in the NY Crude Oil Futures, this market remains in a bullish position at this time with the underlying support beginning at 7929.
On the weekly level, the last important high was established the week of February 26th at 8085, which was up 11 weeks from the low made back during the week of December 11th. So far, this week is trading within last week's range of 8085 to 7584. Nevertheless, the market is still trading upward more toward resistance than support. A closing beneath last week's low would be a technical signal for a correction to retest support.
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 8085 made 0 week ago. Still, this market is within our trading envelope which spans between 6152 and 8772. The broader perspective, this current rally into the week of February 26th reaching 8085 has exceeded the previous high of 7960 made back during the week of November 27th.
Right now, the market is above momentum on our weekly models hinting this is still bullish for now as well as trend, long-term trend. Looking at this from a wider perspective, this market has been trading up for the past 11 weeks overall.
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 March, this market has held above last month's low of 7141 reaching 7141.
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.
Natural Gas Poised for Higher Prices Once Support Tested
By: Bruce Powers | March 1, 2024
• Recent correction in natural gas saw steep declines, increasing potential for a counter-trend rally; a weekly close above 1.79 would confirm bullish breakout.
Upward momentum in natural gas stalled on Friday leading to a minor pullback to below Thursday’s 1.83 low. The low of the day was 1.81, a little shy of testing support around the 20-Day MA, which is currently at 1.795. A successful test of support at the 20-Day line and subsequent bullish reversal will confirm the initial breakout above the line two days ago. Such a development would show an improvement in the uptrend and that it is gaining strength. Therefore, a move to higher prices may be in the works once a successful test of support around the 20-Day line is complete.
Key Near-term Support at 20-Day Moving Average
The area of the 20-Day MA was clearly resistance on Tuesday, the day before a bullish breakout that saw natural gas close above the line. Once there are signs that prior resistance at the 20-Day MA has become support, upward momentum should be ready to proceed.
Due for a Continuation of Counter-trend Rally
The current correction likely completed at last week’s 1.52 low. That was a long-term support level from March 2020 and the subsequent bullish reversal on the weekly chart shows demand improving.
Just by the fact that the recent correction saw a 58.2% decline in the price of natural gas in only 17 weeks, increases the chance of a counter-trend rally of some degree. So far, it has been minimal. The rally has not yet reached the 38.2% Fibonacci retracement. Generally, that level of retracement is looked at as the primary minimum retracement of even a strong trend, a downtrend in this case.
Next Key Metric is a Weekly Close Above Last Week’s High
Further evidence for a near-term bullish outlook will be indicated by a weekly close above last week’s high of 1.79. At the time of this writing trading is happening above that price level and natural gas is on track to close above it. If it does, that will confirm the bullish breakout and increase the chance for a continuation higher. A range from the prior bottoms of the decline off the August 2022 peak at 1.95 to 1.97 would then be the next target. Above that price area is the 38.2% Fibonacci retracement at 2.04.
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Lionhearted. The Energy Report
By: Phil Flynn | March 1, 2024
Oil prices are coming in like a lion. March is here and the Energy Information Administration (EIA) had to admit that US oil demand has been at a 4 year high and Russia is cutting exports of diesel and putting a floor on the price of their oil as fears that maybe sanctions might start to bite. Continuing and expanding backwardation suggests a tight oil market and crack spreads for gas and diesel snapped back after its Monday post (EIA) report plunge and sign that demand in India and perhaps even China is changing the narrative that current supply versus demand did not matter as we were going into a recession. Yet banking concerns could prove to be a headwind for the oil market that looks like it’s leaping toward a global shortage.
As reported by Bloomberg US domestic fuel consumption reached 20.23 million barrels a day last year, the highest level since 2019, according to Energy Information Administration data released Thursday. US demand should continue to strengthen this year to an average 20.39 million barrels a day, just below 2019 levels, said the agency. Forecasts for oil use are being closely watched by market participants, with global balances teetering into oversupply. Bloomberg says, “The EIA has in recent years come under fire for underestimating US demand in its weekly reports, only to revise them markedly higher in the monthly data. In its Thursday report, the EIA raised its estimate for December jet fuel demand by 5%. The agency also revised its figures for year-end gasoline and diesel consumption.
Oil also popped on signs that Russia with cut oil exports if they do not get the price they want as new sanctions are making buyers wary. Bloomberg reports that Moscow has for the first time activated its so-called price floor mechanism to shield the flow of petrodollars to its state budget from Western energy sanctions. Russia, which banned gasoline exports for six months, now is rumored to potentially ban diesel exports which would be a major problem for the globe because the diesel market is way under-supplied. Reuters reported that Russian Deputy Minister Alexander Novak said on Wednesday that Russia is not considering a ban on diesel exports and that a ban on gasoline exports may be lifted at any moment if the market becomes saturated. Yet this morning Reuters is reporting that Russia’s exports of ultra low-sulphur diesel (ULSD) from the Baltic Sea port of Primorsk are set to fall by 13% month on month to 1.73 million metric tons in March, down from the 1.86 million tons scheduled for February, two traders said on Friday.
So that’s why the Biden Administration pushes Russia with new sanctions Russia could cut back creating a global supply deficit by withholding exports that could potentially cause another huge price surge there’s a growing risk of a huge upside move if this happens and hedgers better be prepared just in case.
In the meantime, gasoline demand in the United States continues to be strong refinery outages in Whiting, IN continue to wreck havoc with the supply side and that’s keeping gasoline prices relatively strong, especially across the Midwest. And keeping the national average high, diesel could be a big problem if Russia cuts off exports so stay tuned.
It was reported by India News that India’s demand for jet fuel in February surged past pre-pandemic levels as increased air travel boosted consumption, preliminary data of state-owned firms showed on Friday. Aviation turbine fuel sales by three state-owned fuel retailers soared 7.1 percent to 6,32,600 tonnes in February compared to the year-ago period. This was 55.2 percent higher than the consumption in Covid-marred February 2022 and a shade better than the 6,32,100 tonne demand in February 2020, just before the pandemic set in. Month-on-month jet fuel sales were up 3.5 percent, the data showed.
Yet banking issues could cause a problem for oil bulls. Barrons reported that, “A month after shaking the regional bank industry with a surprise provision for loan losses, New York Community Bancorp rattled nerves again by announcing a $2.4 billion December quarter earnings hit. At the same time, it said it identified “material weaknesses” in its loan review process and abruptly changed CEOs.”
In China, consumer demand for energy is rising but manufacturing is still a worry. China’s manufacturing PMI index hit 49.1 for February, down from 49.2 in January but in line with expectations.
Natural gas is trying to bottom but spring time is making it difficult. The EIA said that working gas in storage was 2,374 Bcf as of Friday, February 23, 2024, according to EIA estimates. That represented a bigger-than-expected decrease of 96 Bcf from the previous week. Stocks were 248 Bcf higher than last year at this time and 498 Bcf above the five-year average of 1,876 Bcf. At 2,374 Bcf, the total working gas is above the five-year historical range.
Still the IEA point out that the United States was again the largest supplier of liquefied natural gas (LNG) to Europe (EU-27 and the UK) in 2023, accounting for nearly half of total LNG imports, according to data from CEDIGAZ. Last year marks the third consecutive year in which the United States supplied more LNG to Europe than any other country: 27%, or 2.4 billion cubic feet per day (Bcf/d), of total European LNG imports in 2021; 44% (6.5 Bcf/d) in 2022; and 48% (7.1 Bcf/d) in 2023
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$WTIC $OIL - Poppin
By: Sahara | March 1, 2024
• $WTIC $OIL - Poppin
Held that Daily Ivory 11/EMA & is piercing the final res-line here.
Needs to hold as it has had a habit of dropping back leaving a wick before the close...
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Natural Gas Price Forecast: Resistance Seen After Target Hit
By: Bruce Powers | February 29, 2024
• Monthly and weekly charts suggest a bullish outlook, with potential for a breakout above recent highs, leading to a gap fill opportunity.
Natural gas continued its advance on Thursday, triggering a new daily high and daily low. The day’s high of 1.92 completed a 127.2% extension of a rising ABCD pattern (D), thereby reaching the second initial target. Yesterday’s closing price was 1.87. If natural gas can close above that price level today, Thursday, it will represent a stronger close than if it ends below that price level.
Signs of Improving Demand
For Thursday, there were several indications showing short-term demand improving. The 20-Day MA was exceeded to the upside and the session closed above it. Currently, the 20-Day line is at 1.81. Second, the day ended above the downtrend line. And third, natural gas busted right through the first target zone at 1.85 with little hesitation and closed above that price level. The 1.85 target is the 100% completion of a rising ABCD pattern.
Potentially Bullish Monthly Pattern Forms
On a monthly basis, natural gas will complete the month of February with a potentially bullish hammer candlestick pattern bottom. A bullish breakout would then occur on a rally above this month’s high of 2.17. That high happens to be the high following the gap down on January 29. In other words, a monthly breakout will put the price of natural gas heading into that gap. Therefore, there would be a good chance the gap would fill, at a minimum, given the significance of a monthly breakout.
Weekly Behavior is Bullish
The weekly chart is also bullish. A bearish shooting star candle completed last week at the lowest weekly closing price in about 189 weeks. It was June 2020 when the weekly close was lower. However, the potentially bearish shooting star pattern failed to follow through. Instead, natural gas rallied above last week’s high, triggering a bullish reversal. The fact that it followed a bearish pattern increases the chance for a continuation higher as some of the fastest bullish moves come after failed bearish signals.
If natural gas continues to rally above today’s high of 1.92 it will next face two potential resistance areas initially. The first is from around 1.95 to 1.97. A second high price area is then at 2.02 to 2.04.
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Product Flop. The Energy Report
By: Phil Flynn | February 29, 2024
Oil prices hit a three-and-a-half month high, yet the oil products flopped in hopes that refiners may be able to meet current demand. Even as gasoline demand hit a three-week high, distillate demand pulled back on the winter heat wave that gripped most of the nation. This comes as Russia, as usual, plays hard to get to agree to the trial balloon put out that would have OPEC PLUS extend voluntary production cuts until the end of the year. Deputy Prime Minister of Russia Alexander Novak, former Russian energy Czar and former stand-in as Russian president for Putin, said it was premature to talk about the production cut extension. Novak of course had a part in pausing Russian gasoline exports driving down domestic gas prices in Russia but also raising concerns that Ukraine’s attacks on Russian refineries could be reducing their ability to refine oil products.
Yet Russian refinery outages may further tighten the global supply of distillates which could be a problem for the global economy as well as for us here at home. Quantum Commodity Intelligence pointed out that in yesterday’s Energy Information Administration (EIA) US stocks fell for the sixth straight week in the seven days to 23 February, albeit marginally and despite a big fall in weekly deliveries of diesel. Total inventories were pegged at 121.1 million barrels, down 510,000 barrels on the week to hit their lowest level since early December.
Oil on the other hand did improve. US crude inventories rose by 4.2 million barrels. That puts commercial crude oil stocks at the highest levels since mid-November. Cushing, OK oil stocks also hit a 6-week high of 31 million barrels. The API’s report had put the Cushing build closer to 1.8 million barrels. Total crude oil stocks hit an eight-month high of 807.4 million barrels.
Gasoline inventories fell by 2.87 million barrels as warm temperatures caused a surge in gasoline demand as motorists tried to take advantage of a bit of summer in winter.
Yet while we have seen improvement in crude supply, we are still below average in a world where supplies are below average and demand expectations are rising. JODI Data reported that Chinese demand rose by 1.2 mb/d to a 4-month high of 11.42 million barrels a day. Not quite the US demand of 19.5 million barrels a day but impressive nonetheless. U.S. commercial crude oil inventories are about 1% below the five-year average for this time of year. Total motor gasoline is about 2% below the five-year and distillates are 8% below the five-year average.
Quantum Commodity Intelligence pointed out that US ethanol stocks rose to an 11-month high last week amid a slowdown in exports despite gasoline demand hitting a three-week high. US ethanol stocks were reported at 26.022 million barrels in the week ending February 22, up 2% on the week and 5% higher on the year. Giovanni Staunovo reports that the EIA will release oil demand/supply data for December today. November crude production was at 13.308mbpd, EIA forecasts 13.338mbpd for December. US oil demand is forecasted at 20.065mbpd in December 23, was at 19.327mpbd in December 22.
Winter’s return and production reductions are giving natural gas hopes for a short-term bottom. With storage above normal and storage full in Europe, today’s EIA report will be critical. Yet despite the price crash and the fact that many producers are going through pain, the long-term outlook for LNG is strong. Anthony Harrup at the Wall Street Journal that U.S. natural gas inventories likely saw another below-average withdrawal last week as milder-than-usual temperatures continued through much of February. Natural gas in underground storage is expected to have decreased by 91 billion cubic feet in the week ended Feb. 23 to 2,379 Bcf, according to the average estimate in a Wall Street Journal survey of 11 analysts, brokers, and traders. Estimates in the survey range from a draw of 103 Bcf to one of 79 Bcf. The forecast implies a bigger withdrawal than the previous week’s 60 Bcf, but below the five-year average draw for the week of 143 Bcf. Stocks the previous week were 22.3% above the five-year average.
The U.S. Energy Information Administration said last week that if the rate of withdrawals matched the five-year average for the remainder of the withdrawal season, inventories would end March at 2,084, or 451 Bcf above the average.
The Gulf Times reported that, ”The global glut plaguing liquefied natural gas markets may start to dwindle in five years, threatening to spur a deficit equivalent to twice the output of leading producer Qatar. New projects are needed to fill the shortfall, with demand for the super-chilled fuel forecast to double in the 20 years to 2035, Cedigaz, a Paris-based industry research group, said in its LNG Outlook. Buyers in Asia are boosting use of the fuel at a “staggering” pace, Jack Fusco, chief executive officer of US exporter Cheniere Energy Inc, said in a Bloomberg Television interview. While plants currently in operation or being built will add to global oversupply, aging facilities and shrinking resources in some areas mean capacity will start declining after 2021. That’s a boon for companies from Royal Dutch Shell to Tellurian Inc and Novatek PJSC looking to invest in new production in the next decade to meet demand. “The continuous growth of the LNG market will leave a large margin for the implementation of new projects,” Cedigaz said in the report e-mailed on Thursday.
The US shale boom may make the country one of the biggest LNG producers by the end of the period, according to the Cedigaz report. Output will end in some nations such as Trinidad and Tobago. “I foresee that the LNG market needs at least a hundred million tonnes of new liquefaction capacity above what’s under construction today in order to meet demand needs of the market by 2025,” Meg Gentle, chief executive officer at Tellurian, said by phone on Thursday. “Demand is growing more than people expected.”
Global LNG capacity is expected to peak at 387mn tonnes a year by 2021-2022 from 288mn tonnes this year at existing or under-construction plants, Cedigaz said. Trinidad and Tobago, the world’s ninth-biggest producer, will stop production in 2029. The Atlantic LNG venture in the Caribbean nation has already curbed output and cut its workforce due to feed-gas shortages.
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Crude Oil Markets Continue to Find Buyers on Dips
By: Christopher Lewis | February 29, 2024
• The crude oil market continues to see a lot of buy on the dip” behavior, therefore I think it comes down to the idea that I had we are heading into a cyclical bullish time of year, and a lot of people will have to pay close attention.
WTI Crude Oil Technical Analysis
As you can see, the crude oil market has been very resilient every time we get a little close to the top of this massive range. That being said, this is a market that I think we’ll continue to see the $80 level as a significant barrier that, if we can break above it, we can really start to take off. The market breaking above there then opens up the possibility of a move to the $88 level. Short-term pullbacks at this point will continue to see buyers in the 200-day EMA and the 50-day EMA indicators underneath as we are forming a huge, rounded bottom.
Brent Crude Oil Technical Analysis
Brent looks very much the same as we’re hanging around the 200 day EMA. The $84.50 level of course will open up the possibility of a bigger move over here and at this point you are still jumping in and buying dips in Brent also. Tensions in the Middle East will continue to drive oil prices higher given enough time. And of course, demand is supposed to be picking up this time of year, typically from a cyclical standpoint. The Federal Reserve is going to continue to be a player as well, as it’s possible that they may cut rates rather aggressively, and if they do, that should spur industry, which of course should drive up demand for crude oil also.
Either way, I have no interest in shorting this market, and therefore, I’m either going to wait for a breakout or buy short-term dips in a back-and-forth manner. I have zero interest in trying to short this market. Because of this, I think you have a situation where if you are patient, you will get paid quite nicely over the longer term. That being said, you also have to be patient, so keep that in mind as well. Regardless, I do think that crude oil is probably going to be one of the stronger trades of the year given enough time.
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Agriculture Daily Market Movers (% Price Change)
By: Energy | February 29, 2024
• Top Movers
NY Natural Gas Futures 4.26 %
• Bottom Movers
NSW Baseload Electricity Continuous 4.76 %
London IPE Gas Oil Futures 2.92 %
NY Heating Oil Futures 2.66 %
AU - Queensland Base-Load Electricity Futures 2.34 %
AU - Victoria Base-Load Electricity Futures 1.92 %
*Close from the last completed Daily
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Today's Futures Heat Map • Strongest: Bitcoin, Cotton, Natural Gas, Soybean Meal
By: Barchart | February 28, 2024
• Today's Futures Heat Map
Strongest: Bitcoin, Cotton, Natural Gas, Soybean Meal
Weakest: Cocoa, Orange Juice, Palladium, Heating Oil
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Natural Gas Price Forecast: Momentum Builds as First Target Exceeded
By: Bruce Powers | February 28, 2024
• Despite a bearish signal last week, natural gas surged to a three-week high, suggesting a bullish reversal and potential for further gains.
Natural gas hit resistance at the 20-Day MA on Tuesday before busting through it today. That marks another piece of evidence for the bulls, at least in the short term. Also, yesterday a bullish trend continuation signal was triggered on a rally above the prior swing high of 1.79 (B) and subsequent close above that price level. This shows improving strength and therefore increases the chance that higher price levels will be tested as resistance before this rally is complete.
Bullish Price Action Follows Tuesday’s Strong Close
In addition, the price of natural gas closed strong yesterday, in the top quarter of the day’s trading range. Today, the first target of 1.85 derived from the 100% completion of a rising ABCD pattern was reached and exceeded as buyers took control and stepped up to support rising prices. Tuesday’s advance also took the price of natural gas above the long-term downtrend line that starts from the August 2022 trend high.
Next Upside Target is 1.92
Once the first target from the ABCD pattern is exceeded, the chance the next higher target will be reached increases. That next target is at the 127.2% Fibonacci extension of the pattern at 1.92. Subsequently, if 1.92 is exceeded to the upside a relatively wide price range from 1.95 to 2.04 is then the next higher target zone to watch for resistance or a bullish breakout through the top of the range. T
Weekly Bullish Price Action
Price action seen in the weekly chart further supports further strengthening for natural gas. Last week completed a potentially bearish shooting star candlestick pattern and the week ended at a new closing trend low. Given this week’s bullish price action it looks like that was a false indication last week as today natural gas advanced to a three-week high. So, there is a clear bullish weekly reversal and a failure of the bearish signal from last week. False moves are frequently followed by a slingshot of sorts in the other direction. If correct, natural gas has a chance of eventually exceeding 2.04. We will be watching its behavior around and within the 1.95 to 2.04 price range carefully for clues.
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Losing The Charge. The Energy Report
By: Phil Flynn | February 28, 2024
While OPEC signals to the market that their production cuts will be extended and signs that Chinese oil demand will continue to rebound, today the market is pulling back on a rising dollar as the market tries to assess the timing and the quantity of potential Fed Rate cuts. This comes as the American Petroleum Institute (API) reported a large 8.428-million-barrel crude oil increase due to refinery outages and maintenance, but a worrisome 3.272 million barrel drop in gasoline supply as well as a 520,00 drop in distillate is putting product supply further below average and sending pump prices higher.
The ongoing problems at the Whiting, Indiana BP refinery are being felt causing more inflationary pain to those on a fixed budget. Oh Wait! I forgot, Transportation Secretary Pete Buttigieg suggested that it’s probably their fault for not buying an electric car. Probably not a good time to bring that up as Apple abandons its plans to build an electric car as it becomes clear that the so-called electric car transition was never based in reality or science and they are better off focusing on Artificial Intelligence which really will transform the economy and environment better than throw away electric vehicles that are dirtier to produce and are too expensive to fix or replace the batteries.
This comes after the Biden administration changed the emission rules to back off the previous push towards electronic vehicles. Part of the problem is Americans do not want the car. Even democrats love their internal combustion engine as it appears that most of them don’t want to buy electric cars. So I guess it’s back to focusing on the realities of oil where the green energy pipe dreams have led to underinvestment leaving a larger future supply gap as well as replacement and decline rates will not be replaced.
Yet today that’s a problem for another day as the market focuses on the dollar and the bond market. This week we get a ton of data. Today we get the GDP as well as the Energy Information Administration (EIA) Petroleum Status Report. Inflation data is going to be key as the market tries to assess the Fed’s next move and when they get the scissors out to start cutting the rates.
We look at the oil market right now and the backwardation in the market seems to suggest a very tight oil market with considerable upside risk. We expect that OPEC will not only follow through with their extended cuts through the end of the year including their voluntary production cuts but they may even suggest that producers that had overproduced their quota will make up for it over the coming months. In OPEC’s mind, they feel they need to have some spare production capacity available if geopolitical events cause a major oil price disruption.
The oil market is also playing down talk that there could be a potential ceasefire between Israel and Hamas in the Gaza Strip. Israeli Prime Minister Netanyahu said he was surprised by Biden’s comments on the possibility of a ceasefire in Gaza by Monday. That comes after Qatar also seemed confused by Biden’s statement. Maybe he knows something they don’t know or maybe he doesn’t know anything. You are the judge.
Supply tightness of products is also becoming an issue with the deep backwardation in Brent crude. It’s clear the market is concerned about very tight supply pressure from refiners to meet distillate demand and that should keep gasoline inventories tighter than normal.
Natural gas production is falling but not fast enough to avert a historic glut. Natural gas production fell to 101.7 according to Woods McKenzie and that’s down 2.3 BCF from the week before. The pain in the natural gas industry is being felt and we’re assuming there’s going to be some bankruptcies and some major cutbacks very shortly.
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$WTIC $OIL - Update. Another failed pop?. Watch the Ivory/MA for Spprt...
By: Sahara | February 28, 2024
• $WTIC $OIL - Update.
Another failed pop?. Watch the Ivory/MA for Spprt...
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Today's Futures Heat Map • Strongest: Natural Gas, Bitcoin, Cotton, Sugar
By: Barchart | February 27, 2024
• Today's Futures Heat Map
Strongest: Natural Gas, Bitcoin, Cotton, Sugar
Weakest: Orange Juice, Cocoa, Soybean Meal, Milk
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$WTIC $OIL - Update. Reuters: OPEC+ to consider extending voluntary oil output cuts into Q2
By: Sahara | February 27, 2024
• $WTIC $OIL - Update.
Reuters: OPEC+ to consider extending voluntary oil output cuts into Q2
Recovered the Daily Ivory 11/EMA & is attacking the Red Res-Line again...
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The Houthis Calling the Shots. The Energy Report
By: Phil Flynn | February 27, 2024
The Iranian-backed Houthi rebels have not been thwarted from attacking ships on the Red Sea by the Biden administration and seem to be calling the shots in the Red Sea as the global oil supply continues to tighten.
This morning a Houthi spokesman graciously put out a statement regarding talk of a cease-fire in Gaza saying that if, “Israeli aggression stopped, and humanitarian aid could get into Gaza perhaps we could reassess the situation in the Red Sea.” While Biden is eating his ice cream cone, he suggested that the ceasefire could be done by the beginning of the weekend or the end of the weekend. The reality is that Hamas is not saying that they’ve agreed to anything yet. Qatar’s foreign minister seemed flummoxed by Biden’s comments about a ceasefire by Monday and offered no comment but instead said they are working hard to get an agreement, but nothing has been agreed upon yet. Meanwhile, it should be a bit embarrassing that this ragtag group of rebels can continue to call the shots in the Red Sea against the United States, the most advanced military on the face of the earth. It makes you wonder about the stability of the rest of the market and the globe.
Zerohedge reported that, “Biden administration officials speaking with CNN told the outlet that the war is not having its desired outcome, that the Houthis’ military capabilities continue to surprise the White House, and that the Pentagon is unaware of the extent of weapons stockpiles in Yemen. “They continue to surprise us. We just don’t have a good idea of what they still have,” said one senior defense official. Multiple officials revealed the issue is that Washington does not know the size of the Houthis’ arms stockpiles and cannot assess if the hundreds of US bombs dropped on Yemen have impacted the Houthis military abilities. Some administration officials now believe the best way to end the conflict is by ending the war in Gaza, according to CNN.
I think there’s a growing concern about the tightening supplies of oil around the world right now based on what we’re seeing on the time spreads. It suggests a tightening of the market. John Kemp at Reuters points out that the calendar spreads show traders expect crude supplies to tighten significantly throughout 2024 as global manufacturing activity starts to expand again while Saudi Arabia and its OPEC? allies continue to restrict production.
Crack spreads for gasoline and diesel came back yesterday with diesel hitting a 4-month high. The time spreads in oil are pricing in the tightness of crude supplies in Europe. And despite all of the talk about weakness in the Chinese economy, Bloomberg wrote that Chinese refineries have been snapping up cargoes from across the world since the mid-February holiday, according to traders, as well as having increased term supplies from Saudi Arabia for March. There’s been a lot of talk about a rebound in Chinese demand after the lunar new year holiday.
The oil market technically hasn’t broken out of the upside of its range at the risk that it will soon be significant. We expect to see the crude oil deficit start to hit home when refiners come out of maintenance. Signs by the Biden administration that they’re going to be buying back from the oil reserve further out in the curve is probably good thinking because the back end of the curve is undervalued. Yet at the same time the Biden administration may be forced to release some oil from the reserve in the short term because of the tightening market and because they want to try to win an election.
The oil product situation is looking very friendly while the market has to focus on a very real global diesel shortage that has been alleviated somewhat by warm temperatures. It will come at the expense of gasoline. The gasoline price increase that we’ve seen in recent weeks could continue into April.
Reuters is reporting that Russia on Tuesday ordered a six-month ban on gasoline exports from March 1 to keep prices stable amid rising demand from consumers and farmers and to allow for maintenance of refineries in the world’s second-largest oil exporter. The ban, first reported by Russia’s RBC, was confirmed by a spokeswoman for Deputy Prime Minister Alexander Novak, President Vladimir Putin’s point man for Russia’s vast energy sector.
While the Biden administration puts a pause on LNG export approvals, Qatar is acting fast to fill that void. Axios reports that Qatari officials unveiled plans to further expand its liquefied natural gas export capacity — something that’s become a politically charged topic in the United States. Why it matters: The announcement Sunday is a bet on robust long-term demand driven by Asia.The latest: State-owned QatarEnergy is adding another 16 million metric tons annually of production by 2030, which would bring its total to 142 by decade’s end. “We still think there’s a big future for gas for at least 50 years forward and whenever we can technically do more, we’ll do more,” energy minister and QatarEnergy CEO Saad Sherida Al-Kaabi told reporters in Doha, per Reuters. The big picture: The U.S. last year became the world’s largest LNG exporter, ahead of Qatar and Australia, with shipments pushing or even exceeding 90 million tons.
Reuters also reports that, “A more than 25% slump this year in northwest Europe’s benchmark natural gas price has helped push the price of gas-fired power generation below the cost of coal-fired generation, and sets the stage for fuel switching by key regional power producers. Utilities that operate networks of both gas and coal-fired plants, such as in Europe’s largest economy Germany, are likely to dial up generation from gas plants and cut back output from coal plants in response to the swing in operating costs.
Natural gas got a boost ahead of the positioning of the merged contract and signs that production is topping out at least in the short term. We could have the market find the bottom. Still, at the end of the day though, if we don’t see demand for natural gas pick up, the glut is going to get larger. That could potentially lead to another price crash later on but at least in the short term, because of the excessive fund short position, the possibility of a rally is very possible. We like puts and calls. Calls out in November and puts for May.
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Natural Gas Price Forecast: Key Support Levels Tested, Rally Potential Ahead Above 1.73
By: Bruce Powers | February 26, 2024
• Natural gas prices tested key support levels, indicating potential for a counter-trend rally with targets at 1.85 and 1.92. However, further confirmation of strength is needed first.
Last Friday natural gas retraced its prior advance to the 78.6% Fibonacci level before finding support at 1.58. Today, Monday, it found a higher support level at the day’s low of 1.59 and managed to exceed Friday’s high of 1.72 briefly before falling back into that day’s trading range. The high for today was 1.73. It is possible that Friday’s low completes a second test of support for the trend low hit last week at 1.52. That low completed a 58.2% decline from the 2023 peak at 3.64.
Advance Above 1.73 Shows Strengthening
A decisive rally above today’s high of 1.73 is a sign of strength and it will increase the chance that Friday’s low will retain support thereby clearing the way for a counter-trend rally. If so, a rising ABCD pattern can be considered for near-term targets. The ABCD pattern provides a couple nearby targets with the first at 1.85. It is interesting to note that the 20-Day MA (purple) at 1.84 is very close to the first target for the ABCD pattern at 1.85. Therefore, a daily close above 1.85 will also be a close above the 20-Day line. Once the 20-Day line is exceeded to the upside the outlook for the price of natural gas should improve, at least a little.
Next Upside Price Levels
The 127.2% extended ABCD target is at 1.92, just shy of the next identified resistance zone from around 1.95 to 2.04. The higher level is the 38.2% Fibonacci retracement, and the lower level was previously the bottom of the downtrend until it was broken on February 8. The 161.8% extended ABCD target confirms that price zone as it is within that range at 2.02.
Once the 20-Day line is exceeded a daily close above the prior trend low and low of the potential resistance zone at 1.95 is a sign of strength and points to a likely test of higher levels within the zone. As well, as price heads into the potential resistance zone the price of natural gas could turn down from somewhere within that price area. However, a daily close above 1.95 should make that less likely or increase the chance the advance may continue following a pullback or consolidation.
An advance above last week’s high of 1.79 will provide a more reliable bullish indication than a breakout above today’s high. That high was at resistance seen in September 2020 and it was followed by a sharp advance.
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Today's Futures Heat Map • Weakest: Natural Gas, Crude Oil, Gasoline, Heating Oil (Ouch for Energy!!)
By: Barchart | February 23, 2024
• Today's Futures Heat Map
Strongest: Cocoa, Orange Juice, Palladium, Feeder Cattle
Weakest: Natural Gas, Crude Oil, Gasoline, Heating Oil (Ouch for Energy!!)
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Natural Gas Continues to See Plenty of Negativity Despite Positive Week
By: Christopher Lewis | February 23, 2024
Natural gas markets have rallied a bit during the course of the trading week, but it is still a very bearish market that I think a lot of people will be looking for value.
Natural Gas Weekly Technical Analysis
We are taking a look at the natural gas weekly chart and it is a positive candle, I can give it that, but we’re still at extreme lows. It looks like $1.50 is probably going to be an area of interest. And you can see why, I mean, it’s been a significant floor for some time.
The problem of course is when you go to the daily chart, you can see just how uninterested most traders are. Above $2, then I think you have people starting to jump in. If you’re a longer term trader, then you need to be patient. You perhaps need to trade an ETF, or at least use very little leverage because this is a market that may not have anywhere to be for quite some time. Keep in mind that we are heading into the slow season, and we’re already down here.
We may get a winter storm sometime between now and spring that could cause a short-term spike, but beyond that, you’re not looking at a market that is likely to continue to have any follow through. Quite frankly, they find more natural gas every day, so it’s not exactly a rare commodity anymore. So, keep that in mind. I’d be very cautious, and I certainly would cut down on any leverage if I chose to buy this market. As far as selling this market is concerned, it really can’t go too much lower because eventually drillers will just stop producing.
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Crude Oil Market Continues to Build Its Base
By: Christopher Lewis | February 23, 2024
Crude markets have pulled back just a bit, but it looks like we are trying to find plenty of support underneath to turn things around.
WTI Crude Oil Weekly Technical Analysis
Taking a look at the crude oil market on the weekly timeframe, you can see that the WTI crude oil market has pulled back just a bit from the 50 week EMA and the $80 level as well. Ultimately, this is a market that continues to build upon a previous consolidation range, and I think a lot of people will be looking at it through that prism.
The 200 week EMA sits right in the middle of this range that extends from $80 on the top to $68 on the bottom. And therefore, I think we’re stuck here, but we are building up a rounded bottom. I do think that given enough time, just the seasonality of it all, we’ll send this market higher.
Brent Crude Oil Weekly Technical Analysis
Brent is very much the same scenario right now, I believe that 84.50 is a major barrier above, somewhere between there and 84, I should say. And now I think short-term pull backs will continue to attract attention, with $72 level underneath being the massive floor in the market. Again, this comes down to the same common themes, supplies dropping a bit, it’s becoming summertime, and therefore people will be looking to drive more and fly more.
And then of course, central banks around the world loosening monetary policy will drive up demand for energy, at least that’s the hope. So, with all that being said, if we can break above our barriers in these markets, in the case of Brent, we could go to $95 as an example. I am bullish in these markets, I like buying dips, but longer term traders, you’re probably going to have to be a little bit patient.
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The Securities and Climate Commission. The Energy Report
By: Phil Flynn | February 23, 2024
The Biden Administration has tried to weaponize almost all government agencies in its desire to have the government do whatever it takes and almost by any means push its climate agenda. But Reality is starting to hit back as not only has the Biden team had to push back on its agenda as its electric car push is hurting Union job creation but also, but it’s also trying to turn the Securities and Exchange common to the Securities and Climate Commission and the Federal Reserve as the new climate policy. Yet the Biden team again has to push back as the Biden Energy Policies are becoming unworkable and putting undue hardship on hard-working Americans, labor, and the US oil and gas industry.
In an exclusive Reuters report, they say that the SEC is now dropping some emissions disclosure requirements from draft climate rules that the Biden Administration tried to force down the rights of public companies.
Reuters wrote that “The U.S. Securities and Exchange Commission (SEC) has removed some of its most ambitious greenhouse gas emission disclosure requirements from corporate climate risk rules it is preparing to adopt, people familiar with the matter said on Thursday. The SEC has dropped a requirement for U.S.-listed companies to disclose so-called Scope 3 emissions, (Scope 3 emissions account for greenhouse gases, such as carbon dioxide, released in the atmosphere from a company’s supply chain )which was included in its original draft of the rules published in March 2022, the sources said.”
Reuters wrote that “If adopted, the new draft would represent a win for many corporations and their trade groups that lobbied to water down the rules. But it would also deviate from European Union rules which make Scope 3 disclosures mandatory for large companies starting this year and potentially complicate compliance for some global corporations. The SEC’s original draft proposed mandatory disclosure of emissions for which companies are more directly responsible, dubbed Scope 1 and Scope 2. Some lobbyists pushed the SEC to require such disclosures only if they are material to a company’s business. Reuters could not ascertain whether the latest draft changed the Scope 1 and 2 requirement thresholds.”
In my opinion, I believe the Biden administration had to back off these requirements because it was almost impossible for many companies to look at the entire chain of their of their carbon supply chain. This would also add to the cost of good feeding into long-term inflation and be detrimental to the ability of many companies to do normal business.
This comes as the American Petroleum Institute and others in the oil and gas industry roll their eyes at the Claims by the Biden Administration and other mis formed people that Biden has been great for the US oil and gas instantly since we have seen record oil production.
The reality is that the reason why we have seen record oil production is due to investments in technology and innovation by the oil and gas that were made before Biden got into office.
The mistake that these people are making is that current oil production is based on investments made years ago and if you want to get a sense of the real impact of the Biden Administration impact is the lack of replacement oil for the inevitable sharp decline rate that is coming. In other words, you must look ahead and that is where this Anti-fossil fuel crusade is going to needlessly raise prices in the future. Its called the reserve-replacement ratio (RRR) which is the amount of oil added to a company’s reserves divided by the amount extracted for production which has fallen under Bbiden.
OPEC has warned that the oil industry needs at least $12 trillion in investment between now and 2045 to prevent energy prices from increasing. The American Petroleum Institute (API) President Mike Sommers warned that “Despite the silver lining of increased production, we’re very concerned about what the clouds look like ahead if we don’t get the policies right now. The continued signals from this administration and the policies they are pursuing – we have real concerns that is sowing the seeds for the next energy crisis.”
OPEC and the API are warning about this. OPEC should be taken seriously because the US Federal Reserve says they do.
In their note “Reasons Behind Words: OPEC Narratives and the Oil Market” The Fed states that their analysis of the content of the (OPEC) communications and whether it provides information to the crude oil market. To this end, we derive an empirical strategy that allows us to measure OPEC’s public signal and test whether market participants find it credible.
Using Structural Topic Models, we analyze OPEC narratives and identify several topics related to fundamental factors, such as demand, supply, and speculative activity in the crude oil market. Importantly, we find that OPEC communication reduces oil price volatility and prompts market participants to rebalance their positions. Our analysis indicates that market participants assess OPEC communications as providing an important signal to the crude oil market.”
In the meantime, US demand for products bounced back last week for both oil and gasoline according to the Energy Information Administration (EIA). The EIA reported a 3.5 million barrel increase in crude oil supplies which was smaller than what was reported by the American Petroleum Institute. Even with that build crude supplies are still 2% below the five-year average for this time of year. We saw an increase in strategic petroleum reserve supplies but still with the drawdown and SPR stocks the cushion of backup supplies is much smaller than it was in previous years.
Globally distillates continue to be a problem even with the flip back to above normal temperatures because of El Nino conditions US supplies have distilled fell by 4 million barrels last week and that puts us 10% below the five-year average for this time of year. Gasoline inventories also fell by 300,000 barrels and are 2% below the five-year average for this time of year if you look at total overall stocks, they fell by 800,000 barrels.
I did see that we saw a bounce back in crude oil refinery inputs as they average 14.6 million barrels a day which was 31,000 barrels a day more than the previous week refineries are still operating at only 80.6% of their capacity due to seasonal maintenance as well as the continuing problems at the Whiting IN BP plant.
While diesel prices are soaring and plunging grain prices starting to raise questions as to whether farmers are going to plant as big a crop as they normally would. Here in the United States, low grain prices have led to surging meat prices’. The cattle herd needs to be rebuilt to meet demand.
The lack of interest in China buying US grain at this point is putting the US farmer behind the 8 ball while the Biden administration bowed to pressure to increase the usage of E15 in many parts of the country year-round it still might not be enough to bail out the farmers especially because he put it off until after the election.
The tightness in diesel supplies means that we need to be hedged going into the planting season. Even as oil prices seem hesitant to break above 80 the first time around the likelihood that we’ll see $80.00 plus oil in the coming weeks is highly likely.
Natural gas is trying to build on hopes that production will cut back to meet the lack of winter demand. Shanir LNG for one is saying that they are not going to let the Biden administration’s pause on LNG export facilities change their future expansion plans there’s a growing sense in the industry that Biden will have to back down and this overreach in his green energy agenda. People in the industry see this as just another political move by President Biden who is getting desperate it’s his poll numbers and approval ratings are dismal. The markets going to watch very carefully for any signs of potential bankruptcies in the natural gas-producing areas.
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$XLE Seasonality
By: Jay Kaeppel | February 22, 2024
• I don't have much of a position in energy at the moment. That could change in the near future.
Jay’s Trading Maxim #52: “Don’t fight price” is good advice.
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Fantasy Island. The Energy Report
By: Phil Flynn | February 22, 2024
The OPEC Secretary General HE Haitham Al Ghais wants to welcome you to Fantasy Island, as the private jets landed at the last climate conference. On the anniversary of the founding of the OPEC cartel, he said that “our energy future needs to be based on facts, not fantasy. This is the only way to deliver a just inclusive and realistic energy transition. This warning comes as the big green energy lobby is coming after Republicans as OPEC warns the world not to buy into the fantasy of the Green Energy Transition that the International Energy Agency (IEA) has made its main mission as opposed to energy security.
This comes as US crude supplies build in yesterday’s American Petroleum Institute (API) report on reduced refinery runs due to the Whiting outage and refining margins that have pulled back from recent highs. The API reported that crude supply increased by 7.168 million barrels versus +4.298 million expected. Yet a 2.908 drop in distillate will support diesel and a 415,000-barrel increase in gasoline was not sufficient enough of an increase as it competes with diesel for refiners’ attention. Energy watcher Patrick Bourque says that refinery outages are right that were 600.000 barrels a day but should improve to 400,000 barrels a day roughly.
Global diesel tightness comes as Russia starts flexing its energy muscles raising their price to buyers and Russian sanctions have failed to reduce Russia’s oil revenue. Even India is complaining that they can’t get any more of that cheap Russian oil. Pricing power for Russia has returned as sanctions fail. So get ready for the Biden administration’s promised new sanctions that cause a surge in aluminum prices that will more than likely make Russia even more money.
Bloomberg News reported, “Aluminum and nickel jumped after US President Joe Biden said the US plans to unveil a “major” sanctions package against Russia on Friday following the death of opposition leader Alexey Navalny. Aluminum prices on the London Metal Exchange rose as much as 1.8% while nickel gained up to 1.3% after Biden’s comments Tuesday to reporters at the White House.” Yet John Kemp points out that non-OPEC production may be one reason that oil prices are not exploding. He writes that, “Brazil’s net petroleum exports climbed by 22% to a record 76 million cubic meters in 2023. Growing output from Brazil as well as other Western Hemisphere producers including the United States, Canada and Guyana have blunted OPEC? efforts to reduce excess stocks and lift prices”
Breitbart is reporting that, “A leaked confidential 66-page document from a top environmentalist association obtained exclusively by Breitbart News reveals a plot by supporters of democrat Joe Biden’s signature legislative accomplishment to begin a pressure campaign against republicans to push them to protect green energy subsidies Biden secured for them. The document, a “February 2024 Board Memo” prepared for board members of the American Clean Power Association, is striking in how specific and aggressive it is in detailing plans for its members to push Republican lawmakers to oppose any GOP effort to repeal all or parts of Biden’s inaptly named Inflation Reduction Act (IRA). The IRA, which passed during Biden’s second year as president, did not lower inflation but did aggressively expand government spending, including perhaps most controversially on the left’s radical green energy agenda.”
They write that, “This 66-page document obtained by Breitbart News is marked on nearly every page as “ACP Confidential Information.” The first dozen or so pages of it include a breakdown of the normal business of a trade association, including a discussion about the election of board members and officers of the group, as well as the organization’s financials. The financial report section explains that the group pulls in tens of millions of dollars annually in revenue, and spends tens of millions of dollars per year as well—making this group a powerhouse trade association in the green energy space. The document, for instance, says the trade association’s finance team estimated a total of more than $62 million in revenue in 2023 and expenses at $55.8 million. In short, this group is extremely well-funded—and the document brags about ACP having more than $49 million in cash available on hand to begin 2024.”
This comes as climate-based fearmongering is out of control. The best way to get you to submit to the green energy agenda, reduce your standard of living and pay sky rocketing energy costs is to report on studies that scare the fantasy island out of you. Bloomberg covered a report that said, “Climate change will drive 200 million Africans into severe hunger, cut crop revenue by 30%, and slash GDP by 7.1%, according to a study”. NOOOO!
Bloomberg cites, “The Center for Global Development study, The Socioeconomic Impact of Climate Change in Developing Countries in The Next Decades, shows that the developing world will bear the brunt of the impact of a warming world. While “moderate economic loss” will be experienced until 2050, after that date the impact will be significant and Africa will be the hardest hit.” Of course, they do not comment on how their past doom and gloom predictions have panned out. Well not very well as their main focus is hyping climate change to try to get rich countries to take their wealth and fund poor countries as they increase their carbon footprint or as they said in 2014, “Climate change is regressive–awful for the rich, but catastrophic for the poor.” But great for the green energy lobby and the policymakers.
All of this energy madness comes as energy prices are working their way stubbornly higher. Oil prices are creeping higher even after the big building inventory and today we will get the Energy Information Administration report at 10:00a central time. Yesterday’s API report with the big build did slow down the market momentum but oil prices are hanging in there on the reality that supplies globally are tightening.
Natural gas prices are getting a boost as the reality that low prices are going to squeeze many producers out of business is causing many of the hedge funds to cover their massive, short position. We do know that there is still a glut of natural gas on the market because of the warm winter. At the same time these prices are so ridiculously low that they are almost out of touch with reality. Low prices cure low prices, and we probably are going look back at these prices longingly in a few years. That’s especially true if Biden looses out and we can see our LNG exports feed the world.
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Natural Gas Price Forecast: Potential for Further Upside
By: Bruce Powers | February 21, 2024
• Natural gas saw a bullish reversal, rallying above last Friday’s high, signaling potential for further upside.
A bullish reversal in natural gas finally triggered late Tuesday on a rally above last Friday’s 1.64 high. Natural gas closed strong, near the highs of the day. The bulls remained in control on Wednesday, driving a rally up to test resistance with a high of 1.79. That price level was previously support at the spike low from September 2020. Since the market is recognizing a previously identified price resistance level, higher price levels may also be recognized by the market.
A Rally Above 1.79 Targets 1.95
Following an advance above today high, the next potential resistance zone is near prior support of the long-term downtrend. It starts from 1.95 and goes up to 1.97. Moreover, the 38.2% Fibonacci retracement is slightly higher than that range at 2.04. Following an advance above 2.04 natural gas heads up into a large consolidation range that includes several key price levels that may stand out. First, there is the high from the gap day on January 29 at 2.17. A rally above there puts natural gas into a gap that fills at 2.31.
Solid Resistance Zone Previous Trend Lows
Notice the additional confirmation of the next target zone that is highlighted in red. The purple 20-Day MA is included within the zone at 1.995, along with two declining trend lines. This is not to say that natural gas goes straight up. Just that it has the potential to test the 1.95 price zone as resistance before it is done, at a minimum, given the significance of the zone. Significance is increased when multiple indications identify a similar price area.
Response to Fast Drop May be a Sharp Advance
This week’s low of 1.52 completed a 58.2% decline in natural gas in only 17 weeks. That’s a relatively sharp decline. Therefore, it wouldn’t be surprising to see a sharp response in the opposite direction. Today’s aggressive one-day rally has seen the price of natural gas rise by over 11% at the day’s high and it follows a strong bounce yesterday. This alludes to the possibility of an aggressive continuation higher. Most rallies over the past year have started relatively quickly, after only a day or two at a bottom.
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Today's Futures Heat Map • Strongest: Natural Gas, Coffee, Cocoa, Cotton
By: Barchart | February 21, 2024
• Today's Futures Heat Map
Strongest: Natural Gas, Coffee, Cocoa, Cotton
Weakest: Palladium, Platinum, Orange Juice, Bitcoin, Corn
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Energy Daily Market Movers (% Price Change)
By: Marty Armstrong | February 21, 2024
• Top Movers
• Bottom Movers
NY Heating Oil Futures 2.99 %
NYMEX RBOB Gasoline Futures 2.7 %
NY Natural Gas Futures 2.05 %
London IPE Gas Oil Futures 1.93 %
NY Crude Oil Futures 1.81 %
*Close from the last completed Daily
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Compression. The Energy Report
By: Phil Flynn | February 21, 2024
Oil and product prices are compressing in a range as natural gas pops in hopes that low prices may start to cure low prices. Reports that Chesapeake Energy will start cutting drilling activity next month suggest that most other producers will do the same or just fade away into the sunset of Chapter 11. The short-term on natural gas looks very bearish and because the fundamentals on oil are bullish, it may take some time before they complete the bottom but definitely the sign that we’re getting close when you start to see production cutbacks.
It was reported that Chesapeake produced 3.66 Bcfe/d in 2023, based on an average of 11 rigs to drill 193 wells, with 166 wells placed on production. Output averaged 3.43 Bcfe/d during the fourth quarter; the company used nine rigs to drill 45 wells and place 52 wells in production. This year, Chesapeake plans to drill 95 wells and place between 30 to 40 in production. Output is expected to range between 2.65 Bcf/d and 2.75 Bcf/d. Last week Comstock Resources, Inc. suspended its dividend and is going from seven rigs to five rigs.
A shaky stock market also rattled the cages of the energy markets. A big sell-off in Nvidia stock is raising concerns that the overall economy might be on shaky ground
Yet from an oil demand standpoint, we hear from JODI that oil demand continues to be at record highs around the globe and what’s more concerning is if you look at global inventories of supply that are well below the five-year average. JODI reported that global crude inventories fell by 8 million barrels in December and were 275 million barrels below the five-year average.
So global oil inventories are a whopping 275,000,000 barrels below the five-year average? Think about that for a moment. Without the record-warm temperatures, we would be in big trouble, not only for diesel but also for the lack of crude supplies.
While supplies tighten, political risk factors are dramatically high. Houthi rebels are threatening the EU after they vowed to step up enforcement and protection of the Red Sea where the Houthi are becoming more belligerent and there are reports now that Iran is supplying Houthi rebels with drone submarines. Of course all of this is not going to matter to the oil market until it matters.
Oh Canada, what are you thinking? Reuters reports that, “Canada has secured the surrender of the last remaining permits for oil and gas development off its Pacific Coast, the federal natural resources minister said on Wednesday, after Chevron Canada (CVX.N), opens new tab voluntarily relinquished 23 permits this month. Energy and Natural Resources Minister Jonathan Wilkinson said the relinquishment of the permits marked an important milestone in permanently protecting the ecologically rich waters of Canada’s west coast.”
What is the suggestion that the White House is making the decision based on the sales of ethanol for purely political decisions? I’m shocked! Reuter reports that, “The White House will approve a request from a group of Midwest governors to allow year-round sales of gasoline with higher blends of ethanol, but will push the start date into next year, two sources familiar with discussions said. The decision will likely be bittersweet for the biofuel industry, which wants to expand sales of corn-based ethanol but might be frustrated by the 2025 start date. The one-year delay could put off any potential localized price spike.
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