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Energy Daily Market Movers (% Price Change)
By: Marty Armstrong | February 10, 2024
• Top Movers
NSW Baseload Electricity Continuous 3.12 %
NY Heating Oil Futures 2.54 %
London IPE Gas Oil Futures 2.47 %
NY Crude Oil Futures 0.81 %
London IPE Brent Crude Futures 0.69 %
• Bottom Movers
NY Natural Gas Futures 3.65 %
NYMEX RBOB Gasoline Futures 0.11 %
*Close from the last completed Daily
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NY Crude Oil Futures »» Weekly Summary Analysis
By: Marty Armstrong | February 10, 2024
NY Crude Oil Futures closed today at 7684 and is trading up about 7.24% for the year from last year's settlement of 7165. At the moment, this market has been rising for this month going into February reflecting that this has been only still, a bullish reactionary trend.
Up to now, we still have only a 1 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.
Looking at the indicating ranges on the Daily level in the NY Crude Oil Futures, this market remains moderately bullish currently with underlying support beginning at 7583 and overhead resistance forming above at 7695. The market is trading closer to the resistance level at this time.
On the weekly level, the last important low was established the week of December 11th at 6771, which was down 2 weeks from the high made back during the week of November 27th. We have seen the market drop sharply for the past week penetrating the previous week's low and yet it recovered to close above the previous week's close of 7228. We are still trading above the Weekly Momentum Indicators so we have not undermined critical support as of yet. 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 7929 made 1 week ago. Still, this market is within our trading envelope which spans between 6126 and 8654.
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 February, this market has held above last month's low of 6928 reaching 6928.
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.
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Natural Gas Price Forecast: What’s Next for Investors?
By: Bruce Powers | February 9, 2024
• Natural gas trends lower, eyes support at 1.80, with potential for further decline below long-term levels.
Natural gas continued its descent on Friday as it triggered a new trend low on a decline below 1.87. It looks to be on its way to the first potential support zone around 1.80. Today’s low at the time of this writing was 1.82. As of today’s low, the price of natural gas was down 1.83 or 50.0% from the October peak of 3.64. This week’s close is likely to end with the price of natural gas in a weak position, near the lows of the week’s range. Although the 1.80 area is the next lower target zone, given the breakdown below long-term support of 1.95 and weakness into the close, it would not be surprising to see natural gas fall below 1.80.
If 1.80 Support Fails, Next Lower Level is 1.61
If 1.80 is exceeded to the downside the next lower level is over 10% lower at 1.61. The March 2016 swing low found support there and it was followed by a sharp rally. Further identifying the 1.61 price area is the falling ABCD pattern. An initial target of 1.94 was exceeded on Wednesday. A second lower target extends the CD leg of the decline by the 127.2% Fibonacci ratio to arrive at 1.60. Since two indicators are identifying the same price area, it deserves to be watched if natural gas does continue to sell off.
Rallies Likely to See Resistance Around Prior Lows Starting at 1.95
If there are signs of support around 1.80 and it leads to a bullish reversal, a rise to test resistance around the prior trend lows of 1.95 and 1.97 is likely at a minimum. An advance above this week’s high of 2.13 would be needed before turning the short-term outlook bullish. Therefore, a bounce from the 1.80 region would be expected to encounter resistance somewhere within the price structure of the down trend.
Natural gas is accelerating its decline and there are no signs of it slowing down yet. It fell below the prior long-term trend low of 2.13 this week with little hesitation. The current decline follows a failed attempt to confirm a bullish reversal and sustain an uptrend above the 200-Day MA (blue) and the long-term downtrend line. Fast moves often come from failed patterns. We are starting to see the results of that in natural gas.
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Losing Control. The Energy Report
By: Phil Flynn | February 9, 2024
Not only does it appear that the Biden administration is losing control of the oil market, sort of how they lost control of our border and world events, but they are also losing control of the narrative as they try to defend the indefensible. The LNG pause has angered our allies and has brought accusations that was nothing but a political stunt. The Department of Energy tried to refute the things that critics said about this administration’s decision to pause exports for an unprecedented ‘climate review’ but maybe they might better serve the American people by addressing growing concerns about a tightening diesel and gasoline market and the longer-term risk to the American People of the growing risk of a supply gap because of climate extremism and underinvestment in fossil fuels.
Before we get into the DOE’s defense of the export ban, we had better focus on the markets. They are starting to price in the possibility of a diesel supply squeeze and to a lesser extent gasoline. Global distillate prices are soaring in the US and Asia. It is soaring as we have refinery outages that are planned and unplanned. The Whiting Refinery in the US as well as the fact that Ukraine is pounding Russian refineries. We saw that on February 3, 2024, two Ukrainian attack drones hit the Lukoil company’s primary oil processing facility at the Volgograd oil refinery in southern Russia. John Kemp, senior market analyst at Reuters warns that, “Global stocks of diesel and other middle distillates are below normal and prices could start to rise quickly if the industrial economies of North America and Western Europe emerge from their lingering recession in 2024. Quantum Commodity Intelligence points out that US gasoline stocks sank to a near one-month low, while demand jumped to its highest level so far this year.
OPEC controls all of the spare capacity as the US discourages production with a record amount of executive orders, drilling moratoriums, and further review. S&P Global is reporting that OPEC members pumped 26.49 million b/d of crude collectively, down from 26.80 million b/d in December when Angolan production was removed. The West African country quit the group in January following a row over quota cuts. OPEC’s 12 countries contributed the lion’s share of the month-on-month production decline, with core group output slipping to 310,000 b/d.
As we saw in the US with inventories and global inventory, we’re seeing a significant tightening of supplies. All of a sudden the market is taking this seriously as before they seemed to ignore the warning signs of this coming squeeze on the market and was ignoring it on the assumption that the Federal Reserve was going to cause a recession. Yet with the economic data being strong and the possibility that inflation might not be as bad as people thought, this should allow the economy to flourish. It also increases the possibility that the Fed will have to cut rates.
This comes as the oil industry warns of what we have been talking about for years, a coming energy shortage. Just this week Occidental CEO Vicki Hollub warned that the global, “Oil market will face supply shortage by end of 2025 as the world fails to replace current crude reserves fast enough. She told CNBC that, “About 97% of the oil produced today was discovered in the 20th century, she said. The world has replaced less than 50% of the crude produced over the last decade. “We’re in a situation now where in a couple of years’ time we’re going to be very short on supply.”
This comes as OPEC is forecasting that global oil demand will grow by 1.8 million barrels per day in 2025 on a solid economy in China, outstripping crude production growth of 1.3 million barrels per day outside the cartel. The forecast implies a supply deficit unless OPEC ditches current production cuts and boosts its output.”
US natural gas prices are getting buried, hitting 42-month lows and the Biden drilling pause may cause a death knell open to many small producers. Natural gas tanked after the EIA reported that, “Working gas in storage was 2,584 Bcf as of Friday, February 2, 2024, according to EIA estimates. This represents a net decrease of 75 Bcf from the previous week. Stocks were 187 Bcf higher than last year at this time and 248 Bcf above the five-year average of 2,336 Bcf. At 2,584 Bcf, total working gas is within the five-year historical range.
The Biden administration all sudden is taking offense at the criticism leveled at them in what many believe is a politically motivated and short-sighted natural gas pause. The DOE decided to respond. They Wrote that, “The Department of Energy (DOE) is responsible for assessing if domestic natural gas can be authorized for export as liquefied natural gas (LNG) to non-Free Trade Agreement (FTA) countries. To make that determination, the DOE evaluates and analyzes a range of factors related to economics, national security, market and environmental data to determine whether that LNG export request is in the “public interest.”
Recently, the DOE announced it would be pausing the review of pending export applications while it updated its economic and environmental analysis that underpins this review. The last time these were formally updated were in 2018 and 2019, respectively. At that time, U.S. LNG export capacity was less than 4 billion cubic feet per day (Bcf/d). Today, that capacity has more than tripled, and the U.S. is the world’s largest LNG exporter with capacity set to nearly double by 2030 because of additional projects currently under construction. Cumulative approved exports are at 48 Bcf/d, over three times our current export capacity.
A lot has changed since 2018. Americans should have the latest understanding of what higher exports mean for our economy, our security, and our health before U.S. energy leaves our shores. Since the announcement, there has been a lot of noise about what this decision means. To correct the record, DOE is shedding light on the facts and dispelling common misconceptions.
❌ Myth: The Biden Administration is banning LNG exports in its war against fossil fuels
✅ Reality: The temporary pause in reviewing new non-FTA export applications. It will not affect operating LNG facilities or additional already authorized LNG exports. It will not disrupt projects under construction.
The industry reality though is that this comes at a time when natural gas producers are under pressure this temporary pause could discourage investment. In this hostile environment that this administration is creating it’s not helpful as we try to expand are energy security.
The DOE Says that Before issuing any new LNG export decisions, DOE is embarking on a transparent process to ensure we are using the most up-to-date economic and environmental analyses to determine whether additional approvals of LNG exports to non-FTA countries are in the “public interest.”
The Biden-Harris administration has repeatedly stated that the future is in clean energy and our transition to clean energy will be a managed transition, one that will help ensure American families and businesses can reliably and affordably keep the lights on, but no reason to do business as usual. We’re updating our analysis to adapt to market dynamics. Supply and demand are shifting rapidly at home and around the world. The U.S. should know how its resources are and will be utilized, and what the need will be as countries around the world commit to reducing emissions and their use of fossil fuels.
My take is that the future is in in everything in above energy policy not just green energy. The Biden Harris administration is short sighted and wants to believe in a world that doesn’t exist they want to ban the use of natural gas buildings and natural gas stoves but not with any viable replacement that’s gonna mean higher prices for consumers the reality is is that natural gas is going to be burned around the globe and whether it comes from the United states or from Russia or Qatar is going to be the only remaining question.
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Natural Gas Price Forecast: Plummets to 42-Month Low, Eyes Next Target
By: Bruce Powers | February 8, 2024
• Natural gas reaches 42-month low, signaling potential for further decline amidst bearish sentiment and moving average confirmation.
New long-term trend lows were reached today in the price of natural gas as it dropped below the prior trend low of 1.95, to a low of 1.87. And trading continues at the lows of the day, at the time of this writing. That is a 42-month low, and it puts natural gas on track to reaching its next lower target of 1.80. That is a prior swing low from September 2020. Once the breakdown is confirmed with a daily close below that level, and then again on a weekly close below, there is a chance for an acceleration of the decline.
Possible Acceleration of Decline
Certainly, a rapid drop in the price of natural gas has been seen before. The 75% drop from the November 2022 swing high in only 13 weeks is a good example. Regardless, a bearish long-term trend continuation signal triggered today. That should be followed by further declines unless there is a sharp upside reversal quickly.
Below the first target of 1.80 there is a potentially more significant support zone from around 1.61 to 1.44. However, there is a concentration of price levels within that zone that starts with 1.60/1.61. It was a weekly interim swing low in the past and an extended downside target for the ABCD pattern completes there. Further down is 1.52. That price level was a significant swing low in the past. It is followed by 1.44. Support was seen there at a swing low from June 2020.
Downside Follow-Through from Large Bear Flag
It seems fair to say that the rising parallel trend channel that developed from the April 2023 low, was a large bear flag. The 75% decline noted above was the pole. Today’s bearish follow-through clears up any confusion for now. Further confirming the bearish sentiment is the crossovers seen in the moving averages. Both the 20-Day and 50-Day MAs have crossed below the 200-Day MA, they are decreasing the angle of decline.
Although the measuring objectives for targets from the bear flag would be extreme, the indication is that that price of natural gas is increasing likely to lower prices. Of course, downside follow-through is still warranted.
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$Oil $WTIC #Energy - Update...
By: Sahara | February 9, 2024
• $Oil $WTIC #Energy - Update...
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Natural Gas Markets Still on The Floor
By: Christopher Lewis | February 6, 2024
• Natural gas markets have struggled over the last several sessions to pick themselves up from the $2.00 level, and Tuesday was no different.
Natural Gas Technical Analysis
Natural gas has initially tried to rally during the Tuesday session, but just cannot seem to get up off of the floor. We are sitting just above the crucial $2 level, which I think a lot of people will be looking at as a major support level. Ultimately, I think this is a market that you will have to be very cautious with, but I do think that there’s probably the opportunity to buy a little bit of value in this area. I wouldn’t get too big with any type of position though, because obviously we have a lot of issues when it comes to the demand for natural gas. After all, the winter time has been a bit of a disappointment. And if that’s going to be the case, that obviously doesn’t help with the supply and demand.
There will be a ton of supply when it comes to natural gas, which is probably truth be told, going to be an issue for the foreseeable future. So with that being the case, I think any rally that you see something that you want to take advantage of, but get out of pretty quickly, you don’t want to get too cute with this, recognizing that the $2 level underneath should offer a certain amount of support. If we were to break down below there, then things could get kind of ugly, perhaps breaking down to the $1.80 level.
I do think that eventually we try to get back to the $2.50 level, which I see as fair value for this market, but right now we just do not have momentum. This is a great market to scalp if you are looking to trade short-term trades, but beyond that, there’s probably not a lot going on. And now that futures traders are focusing on spring, things really start to look dire. And although we may get some rallies from time to time where people collect profit, I don’t think they’re sustainable.
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Crude Continues to See Basing Pattern
By: Christopher Lewis | February 6, 2024
• Crude oil markets where little bit choppy during the trading session on Tuesday in the early hours but it still looks as if we are trying to find some type of basing pattern.
WTI Crude Oil Technical Analysis
You can see that the West Texas Intermediate crude oil market has initially fallen just a bit during the trading session on Tuesday, only to turn around and show signs of life. Again, the market looks as if it is trying to defend the $72.50 basing pattern that we have been in for a while. I do think that oil was oversold at this point, so I have absolutely no qualms about buying it. I think at this point in time you have to look at this as a buy the dip type of market and recognize that although it can be volatile, the reality is that we have sold off so drastically that a little bit of value hunting comes into the picture.
Furthermore, you also have to keep in mind that central banks around the world might be cutting back on interest rates and that spurs economic development. A spurring of economic development, then, in turn, will drive up demand for crude oil. OPEC is starting to lose its sense of humor and will almost certainly do something to cut production and, of course, we have to pay close attention to whether or not the U S will ever go into recession.
It certainly looks as if the economy is still running hot and that of course makes a big difference in the demand for crude oil, especially the WTI grade. The 50-day EMA sits near the $75 level, and that’s my short-term target. But if we can take that out to the upside, the 200-day EMA could be targeted after that, which was right at the last swing high near the $78 level. Underneath, we have massive support at $70, and then again, it’s $68, which is a long-term support level going back several years. So with all that being said, I believe crude oil remains a buy on the dip market.
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Energy Daily Market Movers (% Price Change)
By: Marty Armstrong | February 6, 2024
• Top Movers
ICE Newcastle Coal Continuous 3.13 %
NYMEX RBOB Gasoline Futures 2.87 %
NY Heating Oil Futures 2.44 %
London IPE Brent Crude Futures 0.85 %
London IPE Brent Crude Spot 0.85 %
• Bottom Movers
NSW Baseload Electricity Continuous 5.68 %
AU - Victoria Base-Load Electricity Futures 4.38 %
AU - Queensland Base-Load Electricity Futures 4.3 %
*Close from the last completed Daily
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Oil Launderers. The Energy Report
By: Phil Flynn | February 6, 2024
Global oil supplies are tightening and the fact that Saudi Aramco decided to keep their selling price for their crude unchanged for March, suggests demand is improving. Still, while global oil markets are trying to balance the tight supply of diesel because of the war in Ukraine and the possibility of the Biden administration enforcing sanctions on Venezuela, American taxpayers are paying for the folly of not enforcing sanctions on Iran. Iran’s surging oil revenue has led to the funding of terror groups like Hamas and Hezbollah, leading to the attack on Israeli citizens and what Joe Biden called “radical Iran-backed militant groups” attacks on US bases that killed three Americans in service to our country. Yet as the Biden administration must be blamed for its short-sighted attempts to engage the Iranian regime, there also must be some who are held responsible for getting rich by laundering Iranian oil money and profiting from all the global turmoil the world is facing.
So-called ‘Ghost tankers’ that launder and sell Iranian crude that the Majlis Research Center estimates that the regime’s export revenues for the Iranian year 2024/25 will reach somewhere between $28 billion and $40 billion depending on price and volume and somehow must be bought and paid for using cryptocurrency or maybe, heaven forbid, so-called ‘reputable banks’. Zero Hedge wrote, “But the story of the secret cooperation of reputable European banks, and sophisticated efforts to hide large Iranian transactions has been a more interesting development, and this week Lloyds and Santander UK (based in Spain) have been in the spotlight, causing their shares to take significant hits on Monday. One Europe-based broker has observed, “The market must be realizing that they may be fined. They said that, “A new Financial Times report has raised uncomfortable questions based on smoking gun internal documents which show two of Europe’s biggest banks covertly moving Iranian funds around the world on behalf of an Iranian petrochemicals company based in London. What’s more, Iran’s state-controlled Petrochemical Commercial Company even has offices physically located close to Buckingham Palace. FT writes that the company is “part of a network that the US accuses of raising hundreds of millions of dollars for the Iranian Revolutionary Guards Quds Force and of working with Russian intelligence agencies to raise money for Iranian proxy militias.”
The oil laundering goes beyond Iranian oil and is rampant in Russian oil as well. Today the BBC reports that, “Millions of barrels of fuel made from Russian oil are still being imported to the UK despite sanctions imposed over the war in Ukraine, research claims. A so-called “loophole” means Russian crude is refined in countries such as India and the products sold to the UK. The BBC went on to say, “this is not illegal and does not breach the UK’s Russian oil ban, but critics say it undermines sanctions aimed at restricting Russia’s war funds. The UK government denied there had been any imports of Russian oil since 2022. But a spokesman said internationally recognized “rules of origin” define that crude, once refined in another country, is classed for the purposes of trade as originating from the refining country.”
This illicit supply of oil from both Russia and Iran has kept a lid on global oil prices but there are growing signs that the lid is going to eventually be blown off of this market. While oil prices have experienced weakness even in the face of the US retaliation against Iranian-backed groups, the fact that the Biden administration signaled where the attacks would be led to less in the hopes they could avoid a direct conflict with Iran. I wonder if they called Iran to find out where it might be ok for them to bomb.
Because of that, the oil market is not as worried as it probably should be. John Kemp of Reuters said the global diesel market is roaring and cracks are cracking. Kemp writes that, “Northwest Europe gasoil cracks are climbing as the region’s long industrial recession shows signs of ending and attacks on shipping disrupt east-west diesel trade through the southern Red Sea. The premium for gasoil over Brent with both delivered in April 2024 has averaged $214 per ton so far in February up from an average of $180 in January and $174 in December.
Supply is also tightening because of a Ukrainian attack on a Russian refinery. Reuters is reporting that the Russian company will not resume gas condensate processing at its damaged complex in the Baltic Sea’s port of Ust-Luga this month, at the very least, sources familiar with the maintenance schedule told Reuters on Tuesday. The complex and other energy facilities across Russia have suffered outages due to drone attacks or technical glitches in recent months, adding to uncertainty on global oil markets already rattled by attacks on shipping in the Red Sea. Kemp reported last week that Brent and European gas oil saw buying after attacks on shipping effectively closed the southern Red Sea and Gulf of Aden to tanker traffic associated with Western Europe and North America.
The oil inventories from the American Petroleum Institute might be a bit of a yawner. Refinery issues may mean that runs will be down a bit so crude supplies may be up a bit and products down just a bit.
Yet based on the trend supplies, they should continue to tighten as the days go on.
I still stand by the expectation that we’ll see big drawdowns as we continue through the year. Underinvestment in oil production is leading to a potential generational shortage a few years out. The complacency in the market seems to be based on the assumption that US production is going to continue to rise and that alternative energy sources will fill the void of the underinvestment in fossil fuels. Yet if Biden decides that for the good of the climate, the US will stop exporting liquefied natural gas to the rest of the world, we could see a significant price spike in energy and food prices across the globe.
There are signs too that the Energy Information Administration has overestimated U.S. oil production. HFIR dug down in the data and they are reporting that US crude production is about 300,000 barrels a day below what the EIA says.
Diesel hedgers are in very good shape. Even with the pullback and the volatility we continue to believe that we should be hedging both diesel and gasoline. Seasonally, crack spreads do very well in February. We should also see supplies of gasoline tighten in the weeks ahead. Gasoline demand is robust. We expect it to improve.
As far as natural gas goes it still is going to come down to the weather. From an oversupply viewpoint the market seems poised to move lower but if the weather flips natural gas can flip like we saw just a couple of weeks ago. Winter is coming to an end but the possibility that the storage overhang will be much lower due to another polar vortex is keeping the market intriguing.
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$XLE Energy sector ETF looks close to busting a move soon
By: TrendSpider | February 6, 2024
• $XLE Energy sector ETF looks close to busting a move soon.
Top holdings: $XOM $CVX $COP $EOG $SLB $PSX.
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Today's Futures Heat Map • Strongest: Cocoa, Gasoline, Heating Oil, Soybean Oil
By: Barchart | February 5, 2024
• Today's Futures Heat Map
Strongest: Cocoa, Gasoline, Heating Oil, Soybean Oil
Weakest: Orange Juice, Hard Red Wheat, Silver, Wheat
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Natural Gas Price Forecast: Breaking Down Consolidation, Bearish Pressures Intact
By: Bruce Powers | February 5, 2024
• Chart analysis indicates a critical support breach, reflecting ongoing downward pressure in natural gas markets, with potential downside targets at 1.98, 1.97, and 1.95. Alternatively, upside breakout above 2.17 should lead to higher prices.
No go for natural gas for Monday as it remains within a tight range. It has been consolidating for six days in a relatively tight range at the lows of the current decline. Last week, support was broken at the convergence of three technical levels that are marked by the long-term downtrend line (blue), lower falling trend channel line (purple dots), and the 88.6% Fibonacci retracement. Since then, prior support around the lines was tested on at least five days as resistance, including today. Each time resistance has held with price being rejected to the downside. This reflects continued downward pressure in natural gas.
Formation of Small Expanding Triangle Continues
Over the past week the consolidation pattern has taken the form of a small expanding triangle or broadening formation. Nonetheless, a decisive drop below last week’s low of 2.02 signals a continuation of the bear trend. A decisive move is needed as the broadening formation may further expand. Given the bearish position of natural gas currently, the chance that it could fall to new trend lows is possible. A breakdown should clearly exceed last week’s 2.02 low and the bottom boundary line of the pattern. Lower targets are then at 1.98, 1.97, and 1.95. Otherwise, support may be seen at the lower line, leading to a bounce and the price of natural gas staying within the boundary lines of the triangle.
Next Downside Target is 1.98
The first downside target is the completion of a falling ABCD pattern at 1.98. Symmetry between the AB and CD legs of the decline occurs at that point. The next price levels are from the first trend low in February of last year, followed by the second trend low and lower low that was reached in April 2023. Subsequently, a drop to a new long-term trend low has natural gas first targeting the 1.80 price area. That price was previously a monthly support level.
Bullish Signal on Decisive Rally Above 2.17
Although natural gas is clearly in a bearish position, a bullish reversal may still occur. A decisive rally above last week’s high of 2.17 provides a bullish signal. Filling the gap at 2.31 is then the first order of business and likely. That price level is followed by an interim level of 2.42. Potential resistance from the moving averages begins around 2.60 and rises to 2.67.
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Something In the Air. The Energy Report
By: Phil Flynn | February 5, 2024
Oil prices are falling after a reversal in the odds for rate cuts that overshadowed geopolitical risk factors that seem to be boiling over. The headline job numbers showed 353,000 nonfarm payroll jobs and unemployment falling to 3.7%. Now even though a strong jobs number should bode well for demand, fears remain. The Fed can cut rates and ongoing concerns about a regional bank crisis and a surging dollar are keeping oil prices calm. This came as reports that Hamas is set to reject the Gaza hostage and ceasefire deal proposed in Paris last week, Saudi outlet Al-Arabiya reported.
The market also seems immune to the risk concern as the US retaliates against Iranian-backed terror groups in well-choreographed attacks. Reuters reported that the United States intends to launch further strikes at Iran-backed groups in the Middle East, the White House national security adviser said on Sunday, after hitting Tehran-aligned factions in Iraq, Syria, and Yemen over the last two days.
Reuters reported that two Ukrainian attack drones struck the largest oil refinery in the country’s south on Saturday, a source in Kyiv told Reuters. It’s the latest in a series of long-range attacks on Russian oil facilities which has reduced Russia’s exports of naphtha, a petrochemical feedstock. Lukoil, which owns the 300,000 bpd Volgograd refinery, later said the plant was working as normal.
One country that may be upset that Biden has paused reviews of new LNG export terminals may be Germany. Germany has made some devastatingly bad decisions regarding climate change and becoming more dependent on natural gas to keep the lights on and keep its manufacturing base from fleeing. Javier Blass at Bloomberg wrote that after Germany closed its remaining nuclear power plants it’s now approved plans to subsidize a huge expansion of natural gas powered plants that last says as much as 10 gigawatts but The developers need to know that they can convert them into hydrogen at some point between 2035 and 2040 so they got hydrogen going for them.
The Biden administration has taken a lot of heat for pausing liquefied natural gas export approvals. They are at least concerned about oil and gas production in Guyana. Bloomberg reports that, “Key Biden administration national-security officials traveled to Guyana on Sunday as the US works to prevent the country’s dispute with Venezuela over oil and mineral riches from sliding into armed conflict. Jon Finer, the principal deputy national security adviser, and Juan Gonzalez, the White House National Security Council’s senior director for the Western Hemisphere, are continuing work on regional security and economic stability, the US Embassy in Guyana said. The US Air Force’s southern commander, Major General Evan Pettus, was in Guyana last week to discuss the security cooperation as the US military strategizes how to help the nation protect its oil-heavy Essequibo region. Tension began rising again in 2015 when US giant Exxon Mobil Corp. discovered massive oil reserves off the Guyanese coast. They flared up last year after Venezuelan leader Nicolas Maduro held a referendum that purportedly showed overwhelming support for his nation’s push to take control of the Essequibo.
This comes against a backdrop of US crude supplies tightening. While this week we might get a slight build, the reality is we’re going to continue to see drawdowns in Cushing, OK. The refinery issues at the waiting Indiana plant could lead to a slight drawdown in gasoline and diesel inventories. In the big picture though, we still think that this is a good time to put on some bullish strategies as the downside near 70 should provide tremendous support.
OPEC is going continue to hold the line of production and while the US production has been amazing, there are signs it’s going to top out later this year. The US oil rig count is at a current level of 499.00, unchanged from 499.00 last week and down from 609.00 one year ago. This is a change of 0.00% from last week and -18.06% from one year ago.
Historically warm temperatures could turn into cold temperatures later in the month, but you better enjoy it while you can. HFI research says that the 10-to-15-day weather update shows much colder than normal weather with the signature blocking patterns in place.
One thing you have to keep in mind is that when we talk about the climate, it continues to change, so let’s talk about climate change California style! Weather watcher Ryan Maue has pointed out that California’s climate has changed again! From the worst megadrought in 1200 years — to nearly unprecedented atmospheric rivers and excessive rainfall warnings! Climate scientists might warn that this wet period is a new normal.
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Natural Gas Price Forecast: Analyzing Consolidation Pattern and Breakout Signals
By: Bruce Powers | February 2, 2024
• As natural gas hovers at support levels, the market’s bearish tone is balanced by the age-old Wall Street wisdom – exercise caution in shorting a seemingly dull market
Natural gas remains in consolidation as it further traces out a small broadening formation. It hit a new trend low at 2.02, which is at the lower boundary line of the pattern. This pattern was introduced yesterday as it can give breakout signals as the consolidation range expands. It is defined by two trendlines that are pointed away from each other. After finding support at the day’s low, natural gas had a minor rally and it set to close in the green for the day.
Weekly Chart Confirms Weakness
Nevertheless, the week is on track to end in the red and relatively bearish. Natural gas is trading below the halfway point for the week’s range at the time of this writing. The halfway point is at 2.09. Near term support and resistance for the week are at 2.02 and 2.17, respectively. A breakout in either direction may lead to a continuation in the direction of the breakout. However, keep in mind the broadening formation as a sustainable breakout needs to clearly move out of the expanding range of the pattern.
Broadening Formation Continues
The chance of a bearish continuation remains high. However, support around the monthly low of 2.03 has kept a bearish trend continuation from triggering other than in the formation of the broadening pattern. Downward pressure remains and can be seen in the characteristics of this week’s consolidation as there has been a series of lower daily lows and only one day with a higher daily high, on Thursday. In addition, the high Thursday was not much higher than the prior high of the range.
Use Extra Caution if Shorting a Dull Market
Although the situation in natural gas is bearish, there is an old saying on Wall Street, to never short a dull market. Even though the market is bearish, it can go either way as it is sitting at support and has paused the decline this week. A breakdown would be facing several potential lower support levels, starting at 1.98, which is the target for a declining ABCD pattern. That price level is followed by the two previous trend lows at 1.97 and 1.95. If natural gas breaks below the lower level it may be heading to a previous monthly low of 1.80.
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WTI Crude Oil CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | February 3, 2024
• Following futures positions of non-commercials are as of January 30, 2024.
WTI crude oil: Currently net long 240.1k, up 18.8k.
West Texas Intermediate crude tried to begin the week with a decent rally, touching $79.29 intraday, but only to reverse and close Monday’s session at $76.78. The rejection came just before genuinely testing the upper bound of a 14-month range between $71-$72 and $81-$82. The 200-day moving average lies at $77.42. By Friday, the crude was down in four of the five sessions – past the 50-day at $73.51, closing the week down 7.4 percent to $72.28/barrel with a weekly bearish engulfing candle.
WTI peaked last September at $95.03, having rallied from last June’s low of $67.05. On December 13th, it ticked $67.71 intraday before bottoming. This price point – $67 – is crucial.
In the meantime, as per the EIA, US crude production in the week to January 26th jumped 700,000 barrels per day week-over-week to 13 million b/d. Crude imports increased 25,000 b/d to 5.6 mb/d. Stocks of crude and gasoline rose as well – up 1.2 million barrels each to 421.9 million barrels and 254.1 million barrels. Distillate inventory, on the other hand, declined 2.5 million barrels to 130.8 million barrels. Refinery utilization dropped 2.6 percentage points to 82.9 percent.
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NY Crude Oil Futures »» Weekly Summary Analysis
By: Marty Armstrong | February 3, 2024
NY Crude Oil Futures closed today at 7228 and is trading up about 0.87% for the year from last year's settlement of 7165. At the moment, this market has been rising for this month going into February reflecting that this has been only still, a bullish reactionary trend.
Up to now, we still have only a 1 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 moderately bearish position at this time with the overhead resistance beginning at 7286 and support forming below at 7062. The market is trading closer to the resistance level at this time.
On the weekly level, the last important low was established the week of December 11th at 6771, which was down 2 weeks from the high made back during the week of November 27th. We have been generally trading up for the past 7 weeks from the low of the week of December 11th, which has been a move of 17.10%. When we look deeply into the underlying tone of this immediate market, we see it is currently still in a semi neutral posture despite declining from the previous high at 7960 made 9 weeks ago. Still, this market is within our trading envelope which spans between 6095 and 8691.
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 February, this market has held above last month's low of 6928 reaching 6928.
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.
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Today's Futures Heat Map • Weakest: Gasoline, Crude Oil, Platinum, Silver
By: Barchart | February 2, 2024
• Today's Futures Heat Map
Strongest: Orange Juice, Natural Gas, Nasdaq 100 E-Mini, Sugar
Weakest: Gasoline, Crude Oil, Platinum, Silver
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Crude Continues to Fall Towards Support Below
By: Christopher Lewis | February 2, 2024
• You can see that we have a lot of downward pressure in the crude market during the day as it looks like inflation is going nowhere in the United States.
WTI Crude Oil Technical Analysis
That being said, this is going to be a bit of a buying opportunity before it is all said and done. After all, we’re approaching the $72 level and I think underneath there, you have even more support at the $70 level.
From a longer term perspective, the $68 level has been like a major floor in the market and you have to look at it through that prism as well. I do believe that it is probably only a matter of time before value hunters come back in and when they do, it should be quite glorious. After all, they do tend to be a little bit exuberant, and with oil also having to worry about geopolitical concerns, there’s also the possibility that tensions in the middle East ranted up pricing.
That being said, I’m looking for some type of bounce so if it bounces about a dollar, I’ll be a buyer but until then I’m going to stand on the sidelines and just let the market stabilize itself. Because of this, I think you have to be very cautious, but at the end of the day you also have to look at this through the prism of a market that from a longer term perspective has guarded the area just below quite aggressively.
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Natural Gas Markets Continue to Scrape The Bottom
By: Christopher Lewis | February 2, 2024
• Natural gas markets were relatively quiet during the trading session on Friday, as they continue to scrape the bottom of what seems to be a larger consolidation region.
Natural Gas Technical Analysis
The natural gas market has rallied lightly during the trading session on Friday as we continue to bounce around just above the $2 level. We are rolling over into the next month and therefore a lot of traders are starting to focus on spring. Because of this, it does make quite a bit of sense that natural gas may have trouble rallying, but I do think that we are far enough to the downside right now that we are close to a major support level. With that being the case, I think it’s probably only a matter of time before we bounce, perhaps towards the $2.50 level breaking above there. Then, it opens up the possibility of $3, while underneath we have the $2 level as a hard floor. Keep in mind that natural gas is currently being thrown around by the idea of a busted winter, as the demand for natural gas has fallen off of a cliff.
Furthermore, there is a huge supply of natural gas out there now that the winter has been yet another bust. And with that being the case, there’s no real reason to think that natural gas takes off. In fact, I suspect that we are starting to carve out some type of range for the year between $2 and $3, with the occasional slip outside of that range.
Again, $2.50, I believe is more or less your fair value area and therefore a lot of traders will pay close attention to it. In general, I think you need to maybe look for a buying opportunity and take profit rather quickly. Also, I think this is a range bound market looking for a range bound system for the next several months. This is typical behavior for the natural gas markets, so I think it does make a lot of sense that we would see a return to normalcy as supply of natural gas is well documented, and of course demand will start slipping.
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Collective Cooperation and Harmony. The Energy Report
By: Phil Flynn | February 2, 2024
In a world where it seems like the gates of hell have been opened, it’s nice to know you can find a place where you can find “collective, cooperation and harmony.” Where might that be, you might ask. Well, it is no place other than the good old OPEC cartel.
As OPEC and its favorite co-conspirator Russia agreed to keep the status quo on production and suggested that future production decisions would basically become data-dependent, the meeting turned into a love fest. Kuwait’s oil minister Saad Hamad Nasser al-Barrak just gushed, praising OPEC’s “cooperation and Harmony”. Even Russia‘s warm and fuzzy Deputy Prime Minister seemed to agree. He suggested that the current cuts were just fine and dandy and said that, “Any additional decisions could be taken at any moment and that the Joint Ministerial Monitoring Committee (JMMC) JMMC agreed to take further market actions if needed”. So nice to see that at least someone is getting along in the world.
Oil sold off hard on hopes that the spirit of “collective, cooperation and harmony” might spread in the form of a ceasefire and hostage release in the Gaza Strip. A tweet by Al Jazeera that Israel had agreed to a ceasefire agreement caused an oil market plunge even after the new group recalled and removed the tweet. Yet later headlines raised questions after a Qatar official said there was no ceasefire deal yet for Gaza.
Then we heard from a Hamas official who reportedly said, “We cannot say the current stage of negotiation is zero, and at the same time, we cannot say that we have reached an agreement.” So much for collective peace and harmony.
Even if there is a ceasefire, will it change anything as far as the risks to global oil supply? Does the ceasefire mean that the Houthi rebels will lay down their arms? Does the ceasefire mean Hezbollah will stop attacking? Will there be safe passage again in the Red Sea? When will the ceasefire mean that the US would call off its response against Iran after the Hezbollah bombing that killed three US service people in Jordan?
Well, we have heard from one Iran-backed Iraqi armed group Nujaba who put out a statement that, “We will continue attacks against US forces till Gaza war ends and US forces withdraw from Iraq.
The Wall Street Journal writes that, “The US is said to have approved plans to strike Iranian personnel and facilities in Iraq and Syria in response to a drone attack that killed three US soldiers in Jordan on Sunday. US officials have characterized the response as a “campaign” that could last “weeks”, and will include both airstrikes and cyberattacks, according to NBC. It would target both the Iran-backed militias that carried out the deadly attack and Iranian forces that support them in the region, officials told ABC separately.”
This morning oil rallied back after Iran’s President Ebrahim Raisi gave a speech saying, “We hear the other side say it is not seeking war with Iran. We have said many times that we will not start a war. But if any country engages in bullying, the Islamic Republic will give a strong response.” This came after a report that, “An Iranian Revolutionary Guard advisor was killed in an Israeli strike on Damascus according to a Semi-official Iranian news site.
In Iraq, they’re not feeling too warm and fuzzy about the US dollar. The cradle is reporting that the Finance Committee and iraq’s parliament made a statement on Wednesday calling for the sale of oil and other currencies. The move is to try to shield themselves from the impact of potential sanctions by the United States on the Iraqi banking system.
The other concern for the oil market continues to be stability in the banking system. The stock market rallies on better-than-expected earnings from some of the big tech companies like Meta and Amazon. The underlying concerns and banking could continue to weigh on oil prices. Regional banks have taken a huge hit as the shares of New York Community Bank Corp closed at their lowest level since 2000 Bloomberg reported that the sheriff’s sunk 11% before the day’s previous plunge of 38%. Bloomberg says that the bank at the center of the renewed panic says it believes its stock will recover as investors consider what is called “value-enhancing actions”. Citigroup and JP Morgan have said the broader market has had an overreaction to the regional bank news that should make us feel warm and fuzzy.
On the flip side of that I don’t think too many people are going to be brave enough to be too short ahead of the US planned attacks so unless we see a ceasefire agreed to, more than likely there is an upside risk for prices today.
The power outage that caused flaring at the BP refinery in Whiting should have people in the Midwest scrambling to fill up their gas tanks before prices rise. It’s unclear how long the disruption’s going to take. More than likely it’ll be back online but make no mistake about it, you’ll see those prices go up.
Exxon Mobil could have a good day as it surpassed its earning forecast for the first time in three quarters. Bloomberg reported that adjusted fourth-quarter earnings were $2.48 a share and were $0.26 higher than the consensus estimates.
If on the other hand, we get bad news on the banking front, and they start to fall apart, then we could see crude oil prices go down. Alternately though, the price of oil is headed higher. The OPEC commitment to keep cuts steady and our expectations that we will see better-than-expected demand in the coming weeks and months, we will see the market tighten significantly. While oil prices could dip to just below 70, if it does, that should be a very good low for the rest of the year.
Natural gas prices are going to be focused on the weather. The Freeport LNG export terminal had some delays leading to supplies not falling last week as much as people had thought. The Energy Information Administration reported that working gas in storage was 2,659 Bcf as of Friday, January 26, 2024, according to EIA estimates. This represents a net decrease of 197 Bcf from the previous week. Stocks were 54 Bcf higher than last year at this time and 130 Bcf above the five-year average of 2,529 Bcf. At 2,659 Bcf, the total working gas is within the five-year historical range.
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Energy Daily Market Movers (% Price Change)
By: Marty Armstrong | February 2, 2024
• Top Movers
ICE Newcastle Coal Continuous 0.43 %
• Bottom Movers
NSW Baseload Electricity Continuous 4.17 %
AU - Victoria Base-Load Electricity Futures 3.58 %
NY Crude Oil Futures 2.68 %
AU - Queensland Base-Load Electricity Futures 2.65 %
NY Heating Oil Futures 2.6 %
*Close from the last completed Daily
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Shake And Bank. The Energy Report
By: Phil Flynn | February 1, 2024
The overbought oil market took its eyes off the fundamentals as those old banking stability concerns crept back in. Oil historically performs miserably when bank solvency issues arise and while petroleum mostly shook off the liquidation of China’s massively in-debt real estate developer Evergrande, when the issue hit closer to home, the hedge funds took notice.
Oil reversed gains quickly as word spread of a crash in the share price of New York Community Bancorp which was well over 44% before recovering to be down 38% Wednesday, closing at $6.47, its worst day on record according to the Wall Street Journal. The irony of the situation is that New York Community Bancorp was one of the institutions that acquired assets from Signature Bank, one of the banks that failed in 2023 after California’s Silicon Valley Bank started a run-on regional bank and a run on the oil market.
In March of 2023 when the Silicon Valley Bank failure started to unravel, we saw oil trade lower but in hopes it would be contained and traded as high as $8353 in April 2023. Yet as banks tightened their belts the oil market lost liquidity and recession fears caused oil prices to crash until it finally bottomed out in May of 2023 at $6364. Oil did recover because ultimately the fundamentals for oil were still very good and because the economy did not crash after the failure of other regional banks as well as the downfall of the once mighty Credit Suisse. The oil trade Is sensitive to these developments because it can have a major impact on demand. And with the banks still holding on to massive risk from real estate, it’s causing concerns about the health of the overall economy.
These banking concerns hit the oil market on the same day the Federal Reserve kept interest rates unchanged and happened to remove the line that, “The U.S. banking system is sound and resilient” in the Fed Statement. Now today Bloomberg is reporting that Japan’s bank Aozora lost 20% of its stock value and was tied to US property losses. That sent shares to limit down and raised concerns about the global bank’s exposure to bad real estate bets.
Still, oil is gaining its footing this morning because the fundamentals for oil are still very strong. Not only were the weekly oil inventories very supportive in real terms and on a seasonal basis the fact that the Energy Information Administration once again had to readjust higher their previous demand numbers suggests the potential for a significantly tightening oil market in the coming weeks unless the banking crisis brings us down.
The EIA reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 1.2 million barrels from the previous week. At 421.9 million barrels, U.S. crude oil inventories are about 5% below the five-year average for this time of year. Total motor gasoline inventories increased by 1.2 million barrels from last week and are about 1% above the five-year average for this time of year. Both finished gasoline and blending components inventories increased last week. Distillate fuel inventories decreased by by 2.5 million barrels last week and are about 5% below the five-year average for this time of year. Total commercial petroleum inventories decreased by 9.6 million barrels last week.
Part of the reason that we saw an increase in crude oil supplies was because exports were down due to the cold weather. On top of that, even with the exports being down because of adjustments, we could have seen supplies fall by 900,000 barrels instead of rise. That was pointed out by oil watcher Patrick Bourque.
Interestingly, weekly gasoline demand blew away expectations. Gasoline demand rose by 264,000 barrels a day to 8.147 million barrels a day. Not bad for parts of the country where we’re afraid to go out in the cold. Some drivers of electric cars that did go out in the cold found that their battery life disappeared. Yet the Energy Information Administration did want to point out to those who believe that we can switch to electric cars that there can be hope. They pointed out that, “Combined sales of hybrid vehicles, plug-in hybrid electric vehicles, and battery electric vehicles (BEV) in the United States rose to 16.3% of total new light-duty vehicle (LDV) sales in 2023, according to data from Wards Intelligence. In 2022, hybrid, plug-in hybrid, and BEV sales were 12.9% of total sales. But before you get excited about the electric transition, Bloomberg is reporting that Volvo will no longer extend funding to its loss-making electronic vehicle maker Pulsar and may distribute shares to other shareholders to focus on Volvo’s own ambitions. I guess their own ambition is making cars that somebody might actually want to buy.
While the fundamental picture for oil extremely bullish, for this time of year the key will be whether or not the market can shake off the concerns about the global economy. So far the banking fears have not hit up on the demand side and with the rising geopolitical risk, we could still see some major price spikes. We’ll watch to see if the market feels that this banking crisis will not start a domino effect that will push the globe into a major recession or raise fears.
On the flip side, if banks start seeing their shares get obliterated and it seeps into the overall market psychology, we could see a drop in oil prices. If the stock market seems to shake off these concerns then oil prices will once again be on guard for a significant price increase. Yesterday Jerome Powell said that the Fed had to be convinced that inflation was on target to get down to their 2% rate before they decided to start cutting interest rates. So the Fed will be watching oil prices closely because the biggest risk to a spike in inflation is the extremely tight global oil market and add to that the possibility of a conflict could send these prices soaring. No wonder the Fed is losing sleep at night.
In yesterday’s Energy Report, I pointed out that Russia was very confident that they could continue to sell their oil and they didn’t have to offer such a large discount because sanctions on Russia have failed. So it’s very interesting that later that day after I wrote that report, Javier Blas from Bloomberg pointed out that even though Biden had an executive order 14066 that banned the import of Russian crude oil the US according to EIA imported 333.000 barrels of oil from Russia last month. So I guess that means we’re funding both sides of the Russian-Ukraine war. Maybe the Biden administration may be colluding with Russia. Or maybe he is just a war profiteer. Just make sure the big guy gets his 10%. Just kidding. Later Javier Blass clarified it saying that the oil was shipped from Russia to the Bahamas before March of 2022 when the US banned Russian import so technically it was excluded from the ban after 18 months in storage. Yet the Chinese Russian oil laundering scheme continues.
Natural gas prices are trying to recover on the possibility that we could get another blast of winter in a couple of weeks. The selling of natural gas seems to have eased after the big spike after the polar vortex. Yet consumers in parts of the country are still going to be paying the price. In Colorado, natural gas prices could be going Rocky Mountain high as Xcel Energy is asking to raise its base rate to sell natural gas by 9.5% because of the cost of Winter Storm Uri. Better be leaving on the jet plane if you don’t want to see those higher prices kick in after winter. Yet t if we don’t see price increases for natural gas a lot of producers and providers are going to have big problems.
Biden’s pause on LNG Terminals will not help CO2 emissions. India will start operating new coal-fired power plants with a combined capacity of 13.9 gigawatts (GW) this year, its power ministry said in a statement to Reuters, the highest annual increase in at least six years. Prime Minister Narendra Modi’s government has cited energy security concerns amid surging power demand and low per-capita emissions to defend India’s high dependence on coal. Power generation in 2023 increased by 11.3%, the fastest pace in at least five years.
In the agricultural market, we’re seeing some incredible stories. The US cattle herd the lowest it’s ever been since the 1950s and we are seeing a record for a soybean crush. The Department of Agriculture reported that the US cattle herd fell to the lowest level since 1951. It is the fifth year in a row that cattle inventories fell. Weak prices for soybeans give them increasing demand. Wheat futures could be ready for a massive turnaround if we indeed get this polar vortex that people are talking about. It’s the winter wheat crop that will be extremely vulnerable because of the lack of snow cover. All these upside risks for commodities against the backdrop of an oil market that is very bullish could lead to another spike of inflation in the coming months.
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Oil inventories fall by more than expected 2.5M barrels last week: API
By: Investing | January 30, 2024
U.S. crude stockpiles fell much more than expected last week, the API reported Tuesday, just as markets brace for the U.S. response to a deadly drone on its forces earlier this week.
Crude Oil WTI Futures, the U.S. benchmark, traded at $77.78 a barrel following the report after settling up 1.4%% at $77.82 a barrel.
U.S. crude inventories fell by about 2.5 million barrels for the week ended Jan. 26, compared with a draw of about 6.7M barrels reported by the API for the previous week. Economists were expecting a decline of about 867,000 barrels.
The fall in supplies come as concerns about disruptions to global inventories from rising geopolitical tensions remain front and center after U.S. President Joe Biden said he has made a decision about how to respond to the deadly drone attack in Jordan.
The API data also showed that gasoline inventories increased by 600,000 barrels last week, while distillate stocks fell by 2.1M barrels.
The official government inventory report due Wednesday is expected to show weekly U.S. crude supplies decreased by about 867,000 barrels last week.
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Today's Futures Heat Map • Strongest: Natural Gas, Palladium, Orange Juice, Treasury Bonds
By: Barchart | January 31, 2024
• Today's Futures Heat Map
Strongest: Natural Gas, Palladium, Orange Juice, Treasury Bonds
Weakest: Gasoline, Crude Oil, Wheat, Hard Red Wheat
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Business Is Good. The Energy Report
By: Phil Flynn | January 31, 2024
Well in this uncertain world, it might bring you some satisfaction that for Russia, business is good. Russia’s Deputy Prime Minister and Putin’s bestie, Alexander Novak, not only agrees with OPEC that the oil demand worldwide will grow by a more than healthy 2 million barrels a day on its way to a record 115 million barrels a day by 2025, he also agrees with Marathon Petroleum which also sees record oil consumption in 2024. And because of record-breaking demand and the failure of the West to enforce sanctions on Russia, they now say they expect to be able to sell their oil with less of a discount. So much for those pesky sanctions.
The problem is that as Europe needs oil more than they need to teach Russia a lesson in Ukraine. While most in Europe are not happy with Russia because of shortsighted green energy policies, they can’t quit them. The response by the West to try to put a price cap on Russian oil so their revenue would fall has not worked like the EU and the Biden administration would have liked. What we have seen is Russia freely flowing to China and they became a massive oil laundering scheme as they bought Russian oil, refined it, and sold it back to Europe for big profits.
Business is also great for Iran even as they prepare for a military response from the Biden administration. Biden said, “I have decided how to respond to the attacks on US troops in Jordan.”
Iran supported the terror group that killed three American Soldiers. Iran’s ability to fund those groups is because the Biden administration has failed to enforce sanctions on their oil.
Remember that as of November 2023, Iran’s oil production is 3.4 million barrels per day (mb/d). This increased from 3.1 mb/d in September 2023 to an average of 2.55 mb/d in 2022. Iran’s oil production has doubled since 2019 when it was less than 2 million barrels per day.
In a sign that maybe Iran knows they may have now bitten off more than they can chew, comes a promise in the form of a statement from the Iranian-backed Iraqi Armed Group Kataib Hezbollah that after they killed US soldiers, they will now suspend military and security operations against US forces. Still, Iran is talking tough because they know they have the power the scare the Biden administration. Not only have Iranian-backed groups attacked US troops over 150 times since last October, they so far seem to be getting bolder because of the weak response from the US.
The US says that they wanted to avoid a wider conflict or maybe because they still want to restart the Iranian nuclear deal that ultimately would have given Iran more money and a nuclear weapon. The pressure is now building on the Biden administration to send a clear message to Iran and Biden said that he has decided on how to respond. US Secretary of State Blinken said, “The response against Iran could be multi-leveled and come in stages and be sustained over time.”
Reuters is reporting that Iran will respond to any threat from the United States, Iranian Revolutionary Guards’ chief Hossein Salami said on Wednesday, as Washington weighs its response to the killing of American servicemen by Tehran-aligned militants. “We hear threats coming from American officials, we tell them that they have already tested us and we now know one another, no threat will be left unanswered,” Salami said, according to the semi-official Tasnim news agency.
Besides, Iran has been very busy trying to help the Houthi rebels shut down Red Sea shipping. The Houthis are being funded with that Iranian oil money so business for the Houthis is good as well. The Houthis are hitting more targets and because their actions may have contributed to the deaths of two navy seals are vowing to continue to attack ships. Reuters reported Yemen’s Iran-aligned Houthi group said on Wednesday it would keep up attacks on U.S. and British warships in the Red Sea in what it called acts of self-defense, stoking fears of long-term disruptions to world trade. In a statement, the group’s military spokesperson said all American and British warships participating in “aggression” against its country were targets.
While it seems like the gates of hell have opened under this administration from a geopolitical standpoint, they seem to be having trouble refilling the SPR as quickly as they had hoped. I guess there are some reports that the Biden administration rejected bids to buy back the oil because they deemed the prices to be too high.
We’re seeing here in the US is tightening. The American Petroleum Institute (API) reported that crude supply fell by 2.5 million barrels. What is more, we saw Cushing, OK supplies fall by 2,000,000 barrels as well. That puts supplies at the lowest level in 12 years in the all-important delivery point.
We also saw a 2.1 million barrel drop in distillate inventories and a slight increase in gasoline supplies of 600,000 barrels but most of that could be blending components. So if you look at the overall supply situation we are tightening significantly and will over the next few weeks. Against this backdrop, it is very important to be hedged. The upside price risks are real and rising. A hedge fund short position may have to be covered. One more price spike could cause the margin to be liquidated.
There is growing displeasure with the Biden administration because they decided to delay liquefied natural gas exports. Not only does this give Russia the upper hand in the global energy dominance department but also hurts US producers. The Biden administration’s energy policies not only are bad for the economy but they’re bad from a geopolitical risk standpoint. It is also bad for our national security.
Natural gas prices are continuing to try to determine whether or not winter is over we did get a little bit of support. I’m predicting that we will get another blast of winter. Some forecasters are saying that we could get another blast in February and if that’s the case, we could see the market bottom here and get a bit of a rally but if the weather forecast turns warm, the price pressure will return.
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Natural Gas Faces Bearish Storm: Will the Downtrend Persist?
By: Bruce Powers | January 30, 2024
• As natural gas plunges below moving averages and technical support, a bearish storm brews, raising concerns about the durability of any potential upside reversal.
Downward pressure remains in natural gas as it barely drops below Monday’s low of 2.047, while today’s low was 2.046. Today’s candle takes the form of a narrow range day, and it is bearish given its location within yesterday’s trading range. Therefore, a decisive drop below today’s low signals a continuation of the bear trend. As we head into the close natural gas is set to close weak, relative to Monday’s wide range red candle. Trading within the day was weak overall, and the chance for downside continuation is strong.
Natural Gas Has Taken a Decisive Decline
Given how hard natural gas has fallen, highlighted by yesterday’s gap down and bearish follow through, the market looks like it is going lower. Natural gas is below all its moving averages and has failed to sustain an upside reversal following the move back above the 200-Day MA in late-September. On November 27 a bear flag breakdown triggered, and subsequent price behavior has been bearish. Yesterday’s decline saw the price of natural gas drop below potential support of the long-term downtrend line, the 88.6% Fibonacci retracement, and the lower falling parallel channel line (dotted purple). The day ended weak, with a close near the low of the day.
Lower Support Likely to be Tested Before Bulls Return
A potential support zone begins from around 2.03 to 1.95 and it is derived from prior swing lows where support was seen in the past year. In addition, a falling ABCD pattern extended by the 127.2% Fibonacci ratio identifies a possible pivot at 1.92. It is possible that a bear trend continuation triggers with a move below 1.95 and then support is seen around 1.92, leading to a bullish reversal.
Downward momentum continued off the recent swing high and might run out of steam by the time a new trend low is reached. A similar situation occurred last April. Support was seen at the prior trend low of 1.97 for a couple weeks, leading to a drop below that price level on one day, followed by a bullish reversal back above the lows.
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Today's Futures Heat Map • Weakest: Lumber, Milk, Nasdaq 100 E-Mini, Russell 2000 E-Mini
By: Barchart | January 30, 2024
• Today's Futures Heat Map
Strongest: Orange Juice, Coffee, Soybean Meal, Soybean
Weakest: Lumber, Milk, Nasdaq 100 E-Mini, Russell 2000 E-Mini
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Squeeze City. The Energy Report
By: Phil Flynn | January 30, 2024
The potential for market squeezes is increasing and I am not just talking about orange juice, but I could be as orange juice has been squeezed! I am also not talking about putting the squeeze on our trade partners with the Biden administration’s politically motivated pause on LNG exports for a supposed climate change review. What I am taking about is the potential for a squeeze on WTI as we see Cushing, Oklahoma supplies fall and a potential developing squeeze on diesel fuel. Not only is the market bracing for a response from the Biden administration on the drone attack in Jordan that was executed by an Iranian-backed group, but also if Biden makes good on the threat to reimpose sanctions on Venezuela and the Maduro regime. This, along with the increasing risk from geopolitical events, could cause a quick run for the exits by hedge funds that continue to favor the short side of the market.
Politico is reporting this morning that the Biden administration is considering retaliatory strikes against Iran which could include large-scale attacks on Iranian and proxy targets in Syria and Iraq as well as targeting Iranian naval assets. This comes a day after Bloomberg reported that, “The Biden administration will restore sanctions on Venezuela’s energy sector if the country upholds its ban on an opposition candidate from running for president, two US officials said, a move that risks chilling recent efforts to improve ties between the two adversaries. The US will allow a six-month suspension on sanctions to expire in April if opposition candidate María Corina Machado is barred from running, and is also considering additional measures, according to the officials, who asked not to be identified discussing private deliberations.
Forbes reported that Chevron CVX % is currently the only U.S. oil major operating in Venezuela. Others have tried to fill the vacuum left by North American capital. European firms have stepped in searching for oil and natural gas: Repsol, Eni, Maurel et Prom, and Shell. This comes as the US crude supply is tightening significantly. Not only have we seen significant droughts in the CME group’s Cushing, OK delivery point, but we are also seeing the possibility of the loss of heavy oil once again as the Biden administration may be forced to crack down on Venezuela.
John Kemp at Reuters points out that, “Crude oil inventories at Cushing have dropped to their lowest level for this time of year in over a decade. The depleting stocks at Cushing and the bearish sentiment on the oil market, especially the recent more negative positioning in WTI Crude, could lead to high prices in the near term. In the three weeks to January 19, inventories at Cushing fell by more than 5 million barrels.
Crude inventories around the NYMEX delivery point at Cushing in Oklahoma had depleted to 30 million barrels on January 19 down from 35 million barrels three weeks earlier. Cushing inventories stood at the lowest for the time of year since 2012 and were 14 million barrels (-32% or -1.26 standard deviations) below the prior ten-year seasonal average. With inventories shrinking, many fund managers concluded it was no longer safe to run short positions potentially requiring delivery at Cushing according to Kemp.
Now because the Biden administration tried to enforce sanctions on Russia, they turned to Venezuela to secure heavy oil that refiners needed to make diesel. Yet the deal with Venezuela was for free and fair elections and the Maduro regime is not following through with that promise.
With increasing risks to supplies not only in the Red Sea but the possibility of an escalation between the US and Iran, the inventory numbers are going to be critical. There is more and more focus of course on the following supplies in Cushing, Oklahoma that are getting to critically low levels. On top of that, we are getting to the point where the seasonality for energies becomes very strong as refiners have to get geared up for the upcoming summer driving season. We still think that there’s a significant risk of an upside breakout and it could get worse if the shorts are forced to cover their positions. Yesterday’s market action was mixed but we think that a drawdown in oil inventories today could start turning this market around.
Natural gas, of course, is getting crushed because of the warm-up in temperatures. The expectations are that natural gas supplies will be ample and will be able to get through winter. We’re still waiting to see if these forecasts continue to stay warmer than normal and if that’s the case, we’re probably going to see a sideways to downward movement in the natural gas market.
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Energy Daily Market Movers (% Price Change)
By: Marty Armstrong | January 30, 2024
• Top Movers
London IPE Gas Oil Futures 2.17 %
• Bottom Movers
AU - Victoria Base-Load Electricity Futures 17.68 %
NSW Baseload Electricity Continuous 7.85 %
NY Natural Gas Futures 5.56 %
AU - Queensland Base-Load Electricity Futures 5.54 %
NYMEX RBOB Gasoline Futures 2.63 %
*Close from the last completed Daily
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Navigating the Natural Gas Downturn: Analyzing Today’s Bearish Move
By: Bruce Powers | January 30, 2024
• Natural gas faces a bearish storm as prices plummet, breaching critical support levels and confirming a persistent downtrend.
It looks like a decision was made today in the price of natural gas and it is bearish. Natural gas began the week by opening with a large gap down, easily falling through several possible support levels including the 88.6% Fibonacci retracement, which was completed at 2.14. Yet, the price continued to fall. It is well on its way to testing and possibly exceeded prior support levels near trend lows from 2.03 to 1.95. At the time of this writing sellers remain in control with trading happening at the lows of the day.
Series of Lower Swing Highs Signaled Downside Pressure
Natural gas has been progressing its downtrend since the breakdown of a rising parallel trend channel, also a large bear flag, consolidation pattern on November 27. Subsequently, it found support at the 2.235 swing low in December and rallied to test prior support levels as resistance. A peak of 3.39 was reached in early-January, followed by a decline.
That peak generated a lower swing high and led to a drop to 2.31. Support was subsequently seen at 2.31 leading to a rally into last week’s interim swing high at 2.88. So, there is a series of lower swing highs in the chart for natural gas starting from the peak in October. When including last week’s swing high, an acceleration in downside momentum can be seen. Today, the bears kicked it into high gear with the gap down opening.
Falling Parallel Channel Breakdown Triggers
To add context to today’s decline, a falling parallel channel has been drawn on the chart in purple. The line originates from the top connecting two swing highs. A copy of the line is then attached to the most recent swing low at 2.235. You can see how the lower line was close to identifying the same price support area as the long-term downtrend line. The gap down today opened at the lower falling purple parallel line and the price of natural gas remains well below it. Moreover, today’s opening was just below potential support around the long-term downtrend line.
Monthly Breakdown: Today’s Decline Triggers a Bearish Shift, Surpassing Last Month’s Low
Further evidence supporting the bearish view can be seen in the monthly chart (not shown). Today’s decline triggered a bearish monthly breakdown as last month’s low at 2.235 was exceeded to the downside.
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Heart Breaking. The Energy Report
By: Phil Flynn | January 29, 2024
Oil prices surged on increasing risk perception after the Iranian-backed militia killed 3 U.S. troops and wounded dozens more as the Biden administration’s Foreign Policy is making the world a more dangerous place and sadly much more dangerous for our men and women in the military. Pressure is building on Biden to respond against Iran as opposed to turning a blind eye to Iranian oil sanctions and giving this terror-sponsoring regime billions of dollars. Biden’s naivete about the danger of this regime has cost us all dearly.
The Wall Street Journal Opinion said, “It was bound to happen eventually, as President Biden was warned repeatedly. A drone or missile launched by Iran’s militia proxies would elude U.S. defenses and kill American soldiers. That’s what happened Sunday as three Americans were killed and 25 wounded at a U.S. base in Jordan near the Syrian border. The question now is what will the Commander in Chief do about it? Biden issued a statement Sunday that, “America’s heart is heavy” at the death of patriots who are the “best of our nation.” That sentiment is nice, and no doubt sincere, but at this point, it is inadequate and infuriating.
The sorry truth is that these casualties are the result of the Biden’s policy choices. Mr. Biden has tolerated more than 150 Iranian proxy attacks on U.S. forces in the Middle East since October. Only occasionally has he or the administration registered more than rhetorical displeasure by retaliating militarily, and only then with limited airstrikes. Biden refused to change course even after U.S. troops suffered traumatic brain injuries. A Christmas Day proxy attack in Iraq left a U.S. Army pilot in a coma. Last week, more than a month later, Chief Warrant Officer 4 Garrett Illerbrunn was finally “sitting up in the chair for the first time for most of the day,” and “alert with both eyes opened and following,” his family’s medical blog says.
Mr. Biden vowed Sunday to, “hold all those responsible to account at a time and in a manner our choosing,” though that stock line rings increasingly hollow. He has no choice now other than to approve strikes in retaliation, but targeting the responsible militia is insufficient. The Journal says one thing to watch is whether the Administration will react to this attack by putting more pressure on Israel to stop its campaign against Hamas. This would validate the claim of the militias that they are merely targeting the U.S. because it supports Israel. And it would tell Iran that its militia drone and missile campaign has succeeded in easing pressure on Hamas. But this is how this administration thinks.
Oil prices popped on the opening Sunday night and have pulled back and filled the gap but are still going to be trading nervous with substantial upside risk. Any ministration is going to have increasing pressure on it to do something. In the meantime the Red Sea is still a danger zone. On Friday an oil tanker was actually hit. The risk to oil supplies is still high.
And while the Biden administration plays politics with liquefied natural gas exports, there are reports that the demand for US natural gas is going through the roof. Breitbart reported that, “Texas Land Commissioner Dawn Buckingham says President Joe Biden’s recent decision to stop approval of Liquified Natural Gas (LNG) exports looks “more like retaliation than a sound policy decision.” Biden’s announcement came one day after, “Texas took a bold stand in defending our border against foreign invaders,” the commissioner added.
Biden announced on January 26 that he was placing a “temporary pause on pending decisions of Liquified Natural Gas exports,” Breitbart News reported. January 26 was also the DHS deadline to send in a letter to the State of Texas demanding access to Shelby Park in Eagle Pass, Texas. The State has not budged on opening up the park seized earlier this month.
This comes as it is being reported that global gas demand growth is expected to surge in 2024 due to colder winter conditions and lower prices, the International Energy Agency’s (IEA) latest report on Friday showed, while warning of renewed price volatility amid geopolitical uncertainties. Significant demand for natural gas in mid-February led to the second-largest reported withdrawal of natural gas from storage in the United States, according to the U.S. Energy Information Administration’s (EIA) Weekly Natural Gas Storage Report (WNGSR). Weekly stocks fell by 338 billion cubic feet (Bcf) in the week ending February 19, 2021. “In 2023, global gas demand rose by just 0.5%, as growth in China, North America, and gas-rich countries in Africa and the Middle East was partially offset by declines in other regions,” said the Paris-based energy agency in its latest Gas Market Report.
According to the report, following the loosening of COVID-19 restrictions and the revival of economic activity, China regained its position as the world’s largest LNG importer, with an increase in its natural gas demand rate of 7%. The report predicts a growth of 2.5%, or 100 billion cubic meters (bcm), in the global demand for gas this year. Expected colder winter weather in 2024, compared with the unusually mild temperatures experienced in 2023, is likely to bring increasing demand for space heating in residential and commercial sectors,” it added.
Reuters reported that – Joe Biden on Friday paused approvals for pending and future applications to export liquefied natural gas (LNG)from new projects, a move cheered by climate activists that could delay decisions on new plants until after the Nov. 5 election. The Department of Energy (DOE) will conduct a review during the pause that will look at the economic and environmental impacts of projects seeking approval to export LNG to Europe and Asia where the fuel is in hot demand.
Natural Gas Intelligence reported that, “in the US The whopping 326 Bcf of natural gas that utilities pulled from storage in the third week of January amplified concerns that capacity may prove inadequate in coming years as U.S. production further escalates to meet global LNG demand.
We continue to warn that there is upside risk of price spikes. Be on guard and be hedged.
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Today's Futures Heat Map • Weakest: Natural Gas, Soybean Oil, Coffee, Gasoline
By: Markets & Mayhem | January 29, 2024
• Today's Futures Heat Map
Strongest: Orange Juice, Bitcoin, Milk, Palladium
Weakest: Natural Gas, Soybean Oil, Coffee, Gasoline
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WTI Crude Oil CoT: Peek Into Future Through Futures, How Hedge Funds Are Positioned
By: Hedgopia | January 27, 2024
• Following futures positions of non-commercials are as of January 23, 2024.
WTI crude oil: Currently net long 221.3k, up 49.2k.
As soon as the week began, oil bulls claimed the 50-day moving average, which is now flat. By Friday, the 200-day ($77.59) – also flat – was captured, albeit by a touch. For the week, West Texas Intermediate crude rallied 6.5 percent to $78.01/barrel. This followed a back-to-back weekly spinning top and a sideways action for seven weeks, during which it spent most of its time around the low end of a 13-month range between $71-$72 and $81-$82.
WTI peaked last September at $95.03, having rallied from last June’s low of $67.05. On December 13th, it ticked $67.71 intraday before bottoming. This price point is crucial. As things stand, the path of least resistance is toward the upper bound of the aforementioned range.
In the meantime, as per the EIA, US crude production in the week to January 19th tumbled one million barrels per day week-over-week to 12.3 mb/d. Crude imports, too, decreased 1.8 mb/d to 5.6 mb/d. Stocks of crude and distillates declined as well – respectively down 9.2 million barrels and 1.4 million barrels to 420.7 million barrels and 133.3 million barrels. Gasoline inventory, on the other hand, grew 4.9 million barrels to 253 million barrels. Refinery utilization dropped 7.1 percentage points to 85.5 percent.
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NY Crude Oil Futures »» Turning Back UP Weekly Summary Analysis
By: Marty Armstrong | January 27, 2024
NY Crude Oil Futures closed today at 7801 and is trading up about 8.87% for the year from last year's settlement of 7165. This price action here in January is reflecting that this has been still a bearish reactionary trend on the monthly level. As we stand right now, this market has made a new high exceeding the previous month's high reaching thus far 7826 intraday and is still trading above that high of 7676.
ECONOMIC CONFIDENCE MODEL CORRELATION
Here in NY Crude Oil Futures, we do find that this particular market has correlated with our Economic Confidence Model in the past. The Last turning point on the ECM cycle low to line up with this market was 2020 and 2009 and 2001 and 1998 and 1994. The Last turning point on the ECM cycle high to line up with this market was 2022 and 2018 and 2011 and 2000.
MARKET OVERVIEW
NEAR-TERM OUTLOOK
The historical broader tone of the NY Crude Oil Futures has been a bearish consolidation following the high established back in 2008. Since then, this market has created 2 reaction highs which have been unable to break this overall protracted bearish consolidating trend. Still, the major low was made in 2023 and the market has bounced back for the last year. The last Yearly Reversal to be elected was a Bullish at the close of 2023.
This market remains in a positive position on the weekly to yearly levels of our indicating models. Nevertheless, it closed last year on the weak side down from 2022. Pay attention to the Monthly level for any serious change in long-term trend ahead.
Looking at the indicating ranges on the Daily level in the NY Crude Oil Futures, this market remains moderately bullish currently with underlying support beginning at 7525.
On the weekly level, the last important low was established the week of December 11th at 6771, which was down 2 weeks from the high made back during the week of November 27th. We have been generally trading up for the past 6 weeks from the low of the week of December 11th, which has been a move of 15.58%. When we look deeply into the underlying tone of this immediate market, we see it is currently still in a semi neutral posture despite declining from the previous high at 7960 made 8 weeks ago. Still, this market is within our trading envelope which spans between 6147 and 8765.
INTERMEDIATE-TERM OUTLOOK
YEARLY MOMENTUM MODEL INDICATOR
Our Momentum Models are declining at this time with the previous high made 2021 while the last low formed on 2023. However, this market has declined in price with the last cyclical low formed on 2023 warning that this market remains weak at this time on a correlation perspective declining in both price and Momentum.
Looking at the longer-term monthly level, we did see that the market made a high in September 2023 at 9503. After a four month rally from the previous low of 8346, it made last high in September. Since this last high, the market has corrected for four months. However, this market has held important support last month. So far here in January, this market has held above last month's low of 6771 reaching 6771.
Some caution is necessary since the last high 9503 was important given we did obtain one sell signal from that event established during September 2023. That high was still lower than the previous high established at 12368 back during June 2022. Critical support still underlies this market at 6700 and a break of that level on a monthly closing basis would warn of a further decline ahead becomes possible. Nevertheless, at this time, the market is still weak.
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Navigating Natural Gas: Unraveling Volatility and Trends
By: Bruce Powers | January 26, 2024
• Natural gas experiences price swings, testing resistance at 2.67 amidst bearish signals, with a focus on closing above the 200-Day line for strength.
Volatility in the price of natural gas continued Friday with an initial drop earlier in the session to a three-day low of 2.42. Buyers then stepped for a rally to a high of 2.67, which was a clear test of resistance at the uptrend line and 20-Day MA. That move put it back above the 200-Day and 50-Day MAs. Regardless, it is on track to close back below the 200-Day line, which is at 2.67. If natural gas can end this week above the 200-Day line, it would be a minor sign of strength.
Watching for Further Clarity
Today’s price action didn’t clarify much but if we had to label along with recent activity, it would be more on the bearish side than the bullish. Specifically, there was a daily bearish reversal signaled today with a drop below yesterday’s low. And the 200-Day line was successfully tested as resistance, a sign of weakening. Over the prior two days the price of natural gas got above the 200-Day line, although it could not remain above it.
Continues to Weaken Since October Peak
The progression of the decline from the October peak of 3.64 is bearish. If we step back and simplify price action recently, we end up with more than a few bearish indications. And again, today we have the same with a test of resistance at the 200-Day line. Including this week’s high there is a series of lower swing highs in the chart. This week’s rally tested resistance around the uptrend line, and it failed to hold, leading to aggressive intraday selling and then today’s bearish continuation. Nonetheless, sometimes when a chart seems clear, something unexpected happens. Since natural gas is sitting relatively near lows, a breakdown is difficult to rely upon.
Just a Couple Bullish Indications
Until there are more signs of strength, there are only a couple bullish indications. First, natural gas put in a higher swing low on January 22. And second, it has tested the long-term downtrend line as support and remains above it. Once volatility dies down a little a recognizable short-term pattern should develop. Today’s high can be watched since it tested the 200-Day line. Therefore, a breakout above it will trigger a daily breakout and a trendline break.
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Oil settles at highest in nearly 8 weeks on strong economic growth
By: Investing | January 26, 2024
HOUSTON (Reuters) -Oil prices rose for a second week in a row and settled at their highest in nearly two months on Friday as positive U.S. economic growth and signs of Chinese stimulus boosted demand expectations, while Middle East supply concerns added support.
Brent crude futures rose $1.12, or 1.4%, to settle at $83.55 a barrel, their highest close since Nov 30. U.S. West Texas Intermediate crude (WTI) (CLc1) climbed 65 cents or 0.8% to $78.01, also the highest close since November.
Both benchmarks made weekly gains of more than 6%, marking their biggest weekly increase since the week ending Oct. 13 after the start of the Israel-Hamas conflict in Gaza.
"Economic stimulus from China, stronger-than-expected 4Q GDP growth in the U.S., cooling U.S. inflation data, ongoing geopolitical risks, and the larger-than-expected 9.2 million-barrel drop in U.S. commercial crude stocks for last week have all combined to wedge prices higher," said Tim Evans, an independent oil market analyst.
The Houthi military spokesperson said naval forces carried out an operation targeting an oil tanker in the Gulf of Aden, causing a fire to break out, adding to worries of supply disruptions.
Oil was also boosted earlier this week by a larger-than-expected drawdown in U.S. crude stockpiles. The depletion in inventories, especially around the WTI delivery point at Cushing in Oklahoma and across the Midwest, could create a squeeze on nearby futures prices.
Supply concerns are evident in the structure of Brent futures. The premium of the first-month contract to the sixth on both Brent and WTI rose to the highest since November, indicating a perception of tighter prompt supply.
A potential fuel supply disruption after a Ukrainian drone attack on an export-oriented oil refinery in southern Russia also supported prices.
On the demand side, the U.S., the world's biggest oil consumer, registered faster-than-expected economic growth in the fourth quarter, data showed on Thursday. Sentiment was also buoyed this week by China's latest measures to boost growth.
Traders, however, bet the U.S. central bank is more likely to start its round of rate cuts in May, rather than March, weighing on crude futures.
Also curbing gains, Baker Hughes said U.S. energy firms this week added two oil rigs, pushing the figure up to 499.
Money managers raised their net long U.S. crude futures and options positions in the week to Jan. 23, the U.S. Commodity Futures Trading Commission (CFTC) said.
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Energy Daily Market Movers (% Price Change)
By: Marty Armstrong | January 26, 2024
• Top Movers
AU - Queensland Base-Load Electricity Futures 0.35 %
• Bottom Movers
AU - Victoria Base-Load Electricity Futures 6.39 %
NSW Baseload Electricity Continuous 4.98 %
ICE Newcastle Coal Continuous 2.92 %
*Close from the last completed Daily
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Today's Futures Heat Map • Weakest: Soybean Meal, Wheat, Hard Red Wheat, Cotton
By: Barchart | January 26, 2024
• Today's Futures Heat Map
Strongest: Bitcoin, Coffee, Platinum, Orange Juice
Weakest: Soybean Meal, Wheat, Hard Red Wheat, Cotton
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The Corn & Ethanol Report
By: Daniel Flynn | January 26, 2024
We kickoff the day with Core PCE Price Index MoM & YoY, Personal Income MoM, Personal Spending MoM, and PCE Price Index MoM & YoY at 7;30 A.M., Pending Home Sales MoM & YoY at 9:00 A.M., and Baker Hughes Oil & Total Rig Count at 12:00 P.M.
The Advance Estimate for US 4th quarter real (inflation-adjusted)GDP showed that the US economy grew at an annualized rate of 3.3%. This exceeded the average trade estimate of 2%, However, the nominal GDP figure of 27.9 trillion was up $329 Billion or 1.2% from the 3rd quarter. At the same time the Federal debt grew $834 Billion or 2.5% to a record-large $34 Trillion. In other word, US GDP would have been negative by a substantial amount were it not been for government spending. The Federal debt exceeded GDP for the first time in 2012, and there have been 3 quarters since that the quarterly debt has rapidly accumulated since, as spending has not been reduced to pre-covid levels.
South American weather pattern stagnates with models trending drier in Argentina in 11-15 day period. With the South American pattern stuck through the first full week of February as a blocking upper level Ridge keeps meaningful rainfall funneled into Northern Brazil. A pattern of below/well-below normal rainfall and warming temperatures if forecast elsewhere. Coming rainfall across North/Northeast Brazil aids later planted soybeans and also boosts subsoil moisture ahead of safrinha corn seeding, the duration of heat/dryness in Argentina and far south Brazil needs watching. Farmers and traders will key on subsoil moisture over the next 8-days. Confidence is forecasts beyond 10-days is low, but the EU, GFA, and Canadian models agree that only lie/scattered showers are probable in Argentina Feb 5-9. Temperatures stay elevated, with highs ranging in low/mid-90’s. We cannot stress enough of the importance of February weather across Argentina’s corn ag belt. Only 30% of Argentina’s corn crop was planted prior to November 30th, with 44% planted in December and 15% in January. A full 70% of Argentina’s corn crop will pollinate after February 1st. And an estimated 65% of Argentina’s soybean crop performance hinges upon weather today into March. In other words, Argentine weather is similar to July/August across the Midwest in terms of yield impact. The CBOT grains are coming in weaker on forecast of rain across Argentina and Southern Brazil in the extended 11-15 day forecast. The primary weather models have gone wetter in the February 6-10th period which is causing weather premium to be extracted from price this morning. The CBOT has been adding and subtracting weather premium all week due to changing extended range forecasts.
CBOT open interest declined Thursday with the exception of bullish interest remaining with soybean oil (Note: Malaysian palm oil), Soybean oil Open interest rose 8,126 contracts on a down day, and the rest of the basket of commodities were down with corn -5,766 contracts, soybeans -2,920 contracts, wheat -6,111 contracts, and soybean meal -979 contracts.
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Crude Oil Markets Look Bullish
By: Christopher Lewis | January 26, 2024
• Crude oil markets have broken through a major resistance barrier this week, and therefore it looks like we are ready to continue the recovery of what had been an oversold market.
WTI Crude Oil Technical Analysis
Crude oil initially pulled back just a bit in the West Texas Intermediate grade on Friday, but it looks like we are trying to turn around and show signs of life again. The 200 day EMA sits just above but after the massive breakout that we’d seen on Thursday, I think we do get some follow through at this point. Underneath the $75 level, I believe, is the short term floor in the market if you will and the 50-day EMA hanging around that area also offers a lot of support. If we were to break down below the 50-day EMA then you can make an argument that we are about to get negative, but we have been consolidating for so long that it does make a lot of sense that we see the market finally break out and reach to the upside. Clearing the 200-day EMA opens up the possibility of a move to the $80 level.
Brent Crude Oil Technical Analysis
Brent markets also look as if they are trying to pressure the upside again early in the session and therefore if we can break the 200 day EMA, we could go to the $85 level. Underneath the $80.50 level was the previous resistance that should now be support and we also have the 50 day EMA coming into the picture just below there as well that could offer support also.
This is a market that much like WTI grade had shown a proclivity to try to break out and now that we are getting out of the accumulation phase, it’ll be interesting to see what happens next. Central banks around the world continue to loosen monetary policy, and I think that’s what most people are paying the most attention to. And if that is going to be the case, it should drive up demand for energy in the long term. Right now, I expect to see a lot of volatility, but I still see a buy on the dip type of mentality out there and that’s exactly how I’m going to approach this market. I have no interest in shorting Brent or WTI anytime soon.
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Natural Gas Markets Rollover
By: Christopher Lewis | January 26, 2024
• Natural gas markets have fallen a bit from the crucial $2.50 level, but at this point in time I think we are still in the midst of trying to carve out a bigger range that the market can follow.
Natural Gas Technical Analysis
The natural gas markets initially tried to rally on Friday but gave up gains rather quickly. The $2.50 level seems to be an area where a lot of people would be interested in the market as it is essentially fair value in the overall consolidation range, with the $2 level underneath being massive support and the $3 level, and then the $3.33 level, both offering significant resistance. Ultimately, this is a market that given enough time is going to have to come to grips with the idea that perhaps the winter has been a complete bust. The massive snowstorms and cold weather failed to show up again, and therefore I think we’re about to head into some type of trading range. That does make sense.
Natural gas likes these ranges over the longer term and therefore, I think you’ve got to look at it through the prism of a market that is trying to find its equilibrium. I would suggest that the $2.50 level is its equilibrium at the moment and therefore since we are just below there, I would assume that we’re just going to consolidate sideways. Quite often, this market does that so it would not be a huge surprise either way. With this being the case, I think you have to look at this market through swing trading eyes instead of trying to get too aggressive on short-term charts as the noise is deafening at times.
There’s really nothing out there to move the natural gas markets at the moment. So, what I prefer to do is wait till it gets to the outer edges of its range and trade accordingly in a somewhat longer term range bound system. Natural gas is a very volatile market, obviously, and if we get some type of massive weather related event in the northeastern part of the United States, it can move the market quite rapidly. So, you always want to be cautious about your position size in this market as you can get into a lot of trouble rather quickly.
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Freeze The World. The Energy Report
By: Phil Flynn | January 26, 2024
It’s official, the Biden administration is giving in to groups like the Sierra Club and big green political donors in pausing the approval of exports of new liquefied natural gas projects on Friday. This is another slap in the face to the US Energy Industry, whose trade group the American Petroleum Institute is warning that these types of decisions from this administration are doing long-term harm to the American people’s energy security and sowing the seeds of the next major energy crisis. The move is short-sighted and will cause harm to the US oil and gas industries and could bankrupt many smaller producers who rose to the occasion and kept America warm during the recent polar vortex. Because when the going gets tough the US oil and gas industry gets going.
Just take a moment to consider the fact that during the recent cold blast, 62% of all energy in the United States was powered by natural gas. The reason why gas was the leader is because not only is it one of the most reliable heating fuels, it is because the US oil and gas industry and their cheaper prices made those supplies inexpensive and abundant.
If natural gas was not available, we would have been powered by much dirtier burning coal. I think it’s almost amazing that coal only provided 10% of the energy during the recent cold snap. Petroleum only provided 13%.
Without US producers of natural gas, the emission output by the recent record demand due to the cold would have been a lot worse. The same will be true for the world if the US, which is the “Saudi Arabia” of natural gas, decides to break its commitment to the world by providing cheap cleaner liquefied natural gas (LNG). Without US LNG exports to meet future demand needs, countries in the developing world will turn to dirtier sources of energy. Yet that is what groups like the Sierra Club must want or maybe they would just prefer that people just freeze to death and that ultimately would reduce their carbon footprint.
Oh, sure they will tell you that they just want to replace fossil fuels with clean energy sources like wind and solar but based on the data on the recent cold blasts shows that they are nowhere close to making up the difference. During the record-breaking demand, solar power was only able to provide 1% of the energy that was needed and wind power could only provide 4%.
Now with the United States and the Biden administration trying to put more reliance on unreliable wind and solar the question is during extreme weather events will we be able to keep the lights on? Will our businesses be able to thrive? Will be able to keep people alive?
Reuters reported that the Department of Energy (DOE) will conduct a review during the pause that will look at the economic and environmental impacts of projects seeking approval to export LNG to Europe and Asia where the fuel is in hot demand. The review will take months and then will be open to public comment which will take further time, Energy Secretary Jennifer Granholm told reporters in a teleconference.
Biden said in a statement: “During this period, we will take a hard look at the impacts of LNG exports on energy costs, America’s energy security, and our environment.” He said the pause, “sees the climate crisis for what it is: the existential threat of our time.”
Let’s talk about some of President Biden’s non-existential threats of our times such as the growing risk of a third world war. This morning, we are getting reports that China is sending aircraft to make a show of force against Taiwan. Today the Taiwan defense ministry said that they detected 23 Chinese military aircraft around Taiwan on Friday. This comes after Reuters reported that, “Chinese officials have asked their Iranian counterparts to help rein in attacks on ships in the Red Sea by the Iran-backed Houthis or risk harming business relations with Beijing, four Iranian sources and a diplomat familiar with the matter said. It was the Iranian-backed Houthis Rebels who showed unbelievable aggression toward ships in the Red Sea. While the Biden administration says they don’t want a direct conflict with Iran. It seems that Iran is not fearing an escalation of tensions. Iran is a major financial and logistic backer of Hezbollah and Hamas. The market is still shocked by Hamas’s horrific actions against humanity yet the Biden administration at this point wants Israel to wind down the war.
It is being reported that Biden last week pressed Israeli PM Netanyahu to scale down the Israeli military operation in Gaza, stressing he is not in it for a year of war. Global oil prices are starting to surge although Red Sea oil shipments have only been delayed and they have not been denied. Chinese stimulus hope is driving the price of oil higher and while some may be disappointed by the size of the stimulus, it will add to the growing concerns about a supply deficit.
This morning we’re getting reports that OPEC is already deciding to keep the status quo on production cuts at its next meeting. Financial Juice reports that OPEC+ JMMC meeting on February 1st is unlikely to decide on production volumes after April 1st, and will wait for several weeks – five OPEC+ sources. The potential supply squeeze in the global oil market is coming at a time when we see strong seasonal bullish patterns developing for petroleum. Not only is the seasonal tendency strong for oil to run up late January into February in the next couple of weeks, the market is already starting to prepare for the upcoming summer driving season. See there’s hope that we might see summer again.
For example, the Moore e Research Center one of the top seasonal tendency reports in the country, points out that the July gasoline over heating oil spread has gone up in February 15 years in a row, more specifically between February 3rd and February 26th. While that spread can be extremely volatile and is known as the widow maker, the tendency is extremely strong if the market starts to try to entice refiners to produce gasoline should be ready by the 4th of July. They also see a bull spread that has made money 14 out of the last 15 years and they recommend buying September RBOB versus gasoline versus December our RBOB gasoline between February 4th and February 23rd.
They also recommend September’s gasoline crack spread where you buy the RBOB gasoline and you sell the crude between February 7th and February 20th that trade has made money 15 years in a row. Another recommendation is being long June crude and short December crude in a bull spread that’s made 14 out of the last 15 years in a row.
Now everybody has to remember that despite the seasonal track records, every year is different and you also have to take into account the potential risk of each trade. Some years, even though the trades make money, sometimes you have to take an excessive amount of risk to make that profit. And yes in other words past performance is no guarantee of future results. At the same time, the market cannot ignore the fact that normally we start to see these prices rise and that could be especially true in a year where the risks to supply is high and the demand continues to stay strong.
Natural gas record-breaking demand during the cold front led to one of the largest supply withdrawals in the history of the natural gas market. Gurgen Ayvazyan reports that this year’s week 3 natural gas withdrawal was the single largest in history and was 178bcf higher than the 5-year average. EIA said that, “Working gas in storage was 2,856 Bcf as of Friday, January 19, 2024, according to EIA estimates.
This represents a net decrease of 326 Bcf from the previous week. Stocks were 110 Bcf higher than last year at this time and 142 Bcf above the five-year average of 2,714 Bcf. At 2,856 Bcf, the total working gas is within the five-year historical range. The EIA also says that the natural gas market will return to growth in 2024. Global gas demand is forecast to rise by 2.5% this year after declines in 2022-2023. Demand recovery will be supported by industries.
With that forecast, it makes no sense that the Biden administration is looking to ban LNG exports. The Biden administration is only interested and appeasing their base and their donors ahead of the election.
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Today's Futures Heat Map • Strongest: Heating Oil, Milk, Hard Red Wheat, Crude Oil
By: Barchart | January 25, 2024
• Today's Futures Heat Map
Strongest: Heating Oil, Milk, Hard Red Wheat, Crude Oil
Weakest: Palladium, Cocoa, Platinum, Soybean Oil
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Decoding Natural Gas Trends: Bulls vs. Bears in a Tug of War
By: Bruce Powers | January 25, 2024
• Natural gas faces a crossroads, battling bearish signals after hitting 2.88. Bulls and bears engage in a tug of war, leaving the market in uncertainty.
Natural gas rallies to a high of 2.88 on Thursday and completes a 50% retracement. Resistance was encountered around that high leading to a sharp intraday selloff that took natural gas back down. The rally busted through all the moving averages (20, 50, 200), as well as the uptrend line before reaching the 50% level. During the decline there was little sign of support around the moving averages or any level for that matter until the area around the low from four days ago was reached, leading to a minor bounce.
Rally Earlier in Day Gives Way to Selling Pressure
Yesterday, natural gas recognized the 200-Day MA as it closed slightly above it. Despite the opportunity to close in a position of strength it looks like it is going to end today’s session in a weak position and continue the uncertainty about what might come next. There is argument for both the bull and bear side of the outlook.
Today’s bounce busted through several price levels with little hesitation. However, the subsequent bearish intraday reversal negated those bullish signals as natural gas is set to close below the 200-Day MA, a key trend indicator, leaving the bears in charge. By chance, if it can strengthen before the close and end above the 200-Day line, now at 2.67, it might have a chance to recover more of today’s decline over the next few days.
Bearish Perspective
Since last February’s 1,987 low natural gas has been working on either completing a bottom or a bearish continuation pattern. More recent price behavior is supportive of the bearish possibility. A sharp decline of at least 72% preceded the 1,987 bottom and it was followed by a multi-month ascending parallel trend channel.
Together, the preceding decline and parallel channel set up a bearish flag pattern. That pattern triggered on November 27, and it was followed by a test of the channel as resistance on a rally following the December 13 swing low at 2.36. That rally eventually failed and led to a second swing low at 2.31 earlier this week. If this week’s rally fails to recover above today’s high there will be a third recent lower swing high recreated, which reflects underlying weakness.
Bullish Perspective
For the bullish side, a breakout of the long-term downtrend line triggered in early October, and it was followed by two tests of the line as support. Arguably, the most recent was this week’s low, although it is not yet clear whether that low will stick. Similar price behavior was seen regarding the 200-Day MA. A breakout triggered in late September, but a successful test of the line has not happened. This is why if it does happen (close above today for example or tomorrow), it should be a short-term bullish indication.
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Crude Oil is now at its highest price in almost 2 months
By: Barchart | January 25, 2024
• Crude Oil is now at its highest price in almost 2 months.
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Exxon Mobil $XOM One of several names in the energy sector attempting to form a bottom
By: TrendSpider | January 25, 2024
• $XOM One of several names in the energy sector attempting to form a bottom.
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Natural Gas Markets Continue to Hover at Same Region
By: Christopher Lewis | January 25, 2024
• Natural gas markets have rallied initially during the trading session on Thursday but has shown signs of exhaustion as natural gas has quite a few headwinds just above from a technical analysis standpoint, and quite frankly the fundamentals are not good either.
Natural Gas Technical Analysis
The natural gas markets initially rallied just a bit during the trading session on Thursday, but they gave back a bit of the gains. Now at this point, we have filled the gap from the open on Monday and it looks like we are going to slow down to the $2.50 level, which I think is an area where we could be attracted to it because it is more or less fair value. When I look at the totality of the market, the $2 level underneath is significant support, while the $3 level above is significant resistance. That being said, I do think that the resistance also extends to the $3.33 level, so that is possible as well.
Keep in mind that we are getting close to the end of winter. Remember, futures markets are actually starting to price in March now, and therefore it is going to put some type of downward pressure on natural gas due to the fact that heating demand will drop. This winter has pretty much been a bust as there have been one or two weeks here and there that have been extraordinarily strong, but beyond that, we really haven’t taken off. And that’s mainly because the weather itself has been somewhat mild. So, with that, I think we are getting ready to head into a range for probably most of the year.
The $2 level underneath would be support and again, the $3.33 level above is the ceiling. I’m going to trade this pair like that, or this market like that, for the rest of the year. Now, having said that, we are essentially in the middle, and that means to me that it’s a very neutral market, but based on the exhaustion in the very short term I would not be surprised at all to see this market pull back. If we do rally, the 50 day EMA sits right around the $2.75 level and that could cause a little bit of resistance as well.
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Crude Oil Markets Continue to Look Bullish
By: Christopher Lewis | January 25, 2024
• Crude oil markets are threatening a major breakout at the moment, and therefore we need to pay close attention to what’s going on in both grades.
WTI Crude Oil Technical Analysis
The crude oil market rallied early during the trading session on Thursday, so it looks like we are trying to break out to the upside. After all, the markets have been basing for a while and now I think we have a real shot at oil taking off to the upside, perhaps trying to do everything it can to recover, maybe due to the idea that central banks around the world are going to loosen monetary policy.
Maybe it has to do with the fact that there are attacks in the Red Sea that affect production, or maybe it’s also due to a couple of refineries being shut down, at least in the short term. Either way, it doesn’t really matter because what we do see is a market that has broken above a barrier, and now it looks like we are trying to go look into the 200-day EMA. Short-term pullbacks at this point in time in WTI, I believe, are buying opportunities with the 50-day EMA sitting just below $75, perhaps offering a bit of support.
Brent Crude Oil Technical Analysis
The Brent market looks very much the same, testing the $80.50 level, and it looks like we are breaking out at this point. Ultimately, I think this is a situation where we eventually go looking to the 200-day EMA above, and I think that 200-day EMA will be a bit of a target.
Short-term pullbacks at this point in time will continue to be buying opportunities in Brent as well and of course, both markets do tend to move in the same direction. I think we have been consolidating for a while, trying to build up some type of accumulation phase and we are in the process of perhaps seeing it try to break to the upside. If the economy does end up being at least decent in 2024, then oil will continue to go higher.
We have an oversupply of oil at the moment as far as production is concerned, but that may be shifting and if we get loose monetary policy coming out of all of the major central banks around the world, that will cause more demand due to more business being transacted. So, it’ll be interesting to see how this plays out, but it certainly looks like we are ready to go higher.
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US Embargo! The Energy Report
By: Phil Flynn | January 25, 2024
How would we feel if Saudi Arabia, in the name of saving the planet, decided to restrict oil exports? Well, the well-funded climate zealots of the high religion of saving the planet have pressured the Biden administration into delaying a decision on US Liquified Natural Gas (LNG) exports that not only make a move toward net zero emissions almost impossible but will inflate global energy prices and force many US natural gas producers out of business. In banning US natural gas exports, the US will lose its global economic advantage by having the cheapest hydrocarbons on the planet and that will inspire more manufacturing to go to other countries where their environmental standards are much lower than here in the US.
The story was given to the New York Times reporter Coral Davenport by one of those unnamed White House sources. The Times wrote that, “The Biden administration is pausing a decision on whether to approve what would be the largest natural gas export terminal in the United States, a delay that could stretch past the November election and spell trouble for that project and 16 other proposed terminals, according to three people with knowledge of the matter. The White House is directing the Energy Department to expand its evaluation of the project to consider its impact on climate change, as well as the economy and national security, said these people, who spoke on condition of anonymity because they were not authorized to publicly discuss internal deliberations. The Energy Department has never rejected a proposed natural gas project because of its expected environmental impact.”
Well, I can help them with that. The increased use of natural gas has been one of the biggest driving forces in reducing greenhouse gas emissions by replacing coal and oil while lowering costs for food and fertilizer so poor people do not freeze or starve. A short-sighted move by this administration to ban LNG exports would increase the odds of those things happening. The thing is that I believe the Administration already knows that, so the delay is just to appease their green energy donors. If they follow through with the ban many natural gas producers in the US that are already on the bubble more than likely, will have to shut-in wells and declare bankruptcy. The US is the Saudi Arabia of natural gas and if we restrict exports, it will have a devastating affect on the poor and the environment.
The Energy Information Administration reported today that U.S. dry natural gas production in the Lower 48 states reached an all-time monthly high of 105.5 billion cubic feet per day (Bcf/d) in December 2023, according to data from S&P Global Commodity Insights. In 2023, Lower 48 dry natural gas production increased by 3.7% (3.6 Bcf/d) from 2022. Dry natural gas production increased by 3.8 Bcf/d in the fourth quarter of 2023 (4Q23) compared with the average for the first three quarters of 2023.
Without US LNG countries like China and India and other countries in the developing world will be forced to use different forms of energy like oil and coal to keep the lights on. And to go back to my original question how would we feel if Saudi Arabia cut off their oil export? It was 50 years ago, during the Arab oil embargo, the United States fell vulnerable when Arab nations cut off our energy supply. It was a wake-up call that we needed to become more energy independent. Now that we have achieved that goal, it is wrong headed to step back into the abyss and put our energy security in the hands of others at the same time other countries will be upset at the United States for restricting our exports of a commodity that is going to be extremely valuable to them to allow their countries to feed and employ their people.
The futures market, the global economy and even the International Energy Agency have been counting on US LNG. Without it, there will be negative consequences no matter what side of the green fence you are on.
Both oil and natural gas are on a tear today. Oil is breaking out as the supply side fear that we have been warning about is starting to become a reality. Oil surged to the highest level in two months driven by hopes that a Chinese stimulus package will keep Chinese oil demand on an upward trajectory and a massive drawdown in the US oil supply.
The Energy Information Administration (EIA) reported in its polar vortex impacted report that US crude inventories fell by more than 9 million barrels last week, to hit the lowest level since October, while total oil stockpiles nationwide had the biggest weekly decline since 2016 according to Bloomberg news. So at 420.7 million barrels, U.S. crude oil inventories are about 5% below the five-year average for this time of year. US oil production got frozen out, dropping from 13.3 million barrels a day to 12.3 million barrels a day. To get back up to the high, it might take a month or more and even longer if we get hit with Polar vortex 2, which some are predicting could happen.
Total motor gasoline did increase by 4.9 million barrels from last week and is about 1% above the five-year. finished gasoline inventories decreased while blending components inventories increased last week. Can’t run your car on blending components. Distillate fuel inventories decreased by 1.4 million barrels last week and are about 4% below the five-year average for this time of year. Total commercial petroleum inventories decreased by 22.3 million barrels last week.
Looking at the four-week demand picture is looking impressive. Demand averaged 19.5 million barrels a day, up by 3.3% from the same period last year. Gasoline demand averaged 8.1 million barrels a day, up by 3.7% from the same period last year. Distillate fuel demand averaged 3.4 million barrels a day over the past four weeks, down by 6.9% from the same period last year. Jet fuel product demand was up 1.6% compared with the same four-week period last year.
The global market is starting to take more seriously the geopolitical risk factors. The Iranian-backed Houthis are claiming this morning that their naval forces directly hit a US military ship. This comes as the Biden administration desperately pleads with Iran that they don’t want a wider war. Yet Iran may. ABC news reports that, “Iran’s top diplomat told ABC News Chief Global Affairs Correspondent Martha Raddatz in an exclusive interview Tuesday. “The scope of the war has become wider. This means that the danger of having a wider war in the region has gone up,” Iranian Foreign Minister Hossein Amir-Abdollahian said, blaming the U.S. and Israel for the escalating tensions. “If the U.S. today stops its backing — logistical and weapons, political and media support — of the genocidal war launched by Israel, then I can assure you that [Israeli Prime Minister Benjamin] Netanyahu will not survive for 10 minutes,” he asserted. “So the key to solving the problem is in Washington before it is in Tel Aviv.”
The geopolitical risk factors have risen dramatically under Biden whether it’s the war in Ukraine or the increasing tensions with China and now by the belligerent actions by Iran sure seems to suggest that the risk factors for oil more than likely will continue to rise.
Now with the world heading into a global supply deficit and with shipments of oil being delayed, is one of the main reasons why you need to be hedged in these perilous times.
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