Written Commentary
CRUDE OIL
The energy markets remain caught in fundamental and technical ranges with the trade facing a measure of big picture bearish news from a strengthening dollar, an uptick in global interest rates, a large projected increase in 2024 oil exports from the Caspian Pipeline Consortium and from signs of softening Indian diesel demand. However, prices should be supported in the short-term by a 14% week over week decline in global crude oil in floating storage and from last week’s news that Chinese 2023 crude oil imports posted a record of 11.28 million barrels per day or a gain of +11%. In fact, the bull camp should be emboldened by reports out of Singapore this morning suggesting Chinese refiners are in a buying mode and need to refill their inventories. Certainly, extreme cold temperatures throughout the US provides some demand support but that lift might be temporary as the latest National Weather Service data shows US heating degree days were 19 degree days below normal last week. On the other hand, concerns of shipping through the Red Sea has resulted in inventory backing up and in turn creating tightness in certain arrival destinations. In a minimally supportive development, there are reports that certain US oil production areas are already suffering reduced output due to extreme cold which is expected to maintain through this week.
NATURAL GAS
The downside action in natural gas prices today must be devastating to the bull camp as the deepest and widest spread subzero pattern in the US in several years has failed to halt last week’s reversal down from multi-month highs. However, reports that LNG shipments continue through the Red Sea indicates the markets lack of need for a supply premium from the Middle East crisis. On the other hand, a pattern of large consumption in the US should manifest in several large weekly withdrawals ahead and that combined with record US exports and some lost production due to extreme cold should help natural gas find value on the charts.
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