CRUDE OIL
February Crude Oil fell to its lowest level since December 11 overnight following yesterday’s weak action, but it has clawed back much of those losses. The recovery overnight may have been supported a President-Elect Trump’s posting on Truth Social overnight that the European Union may face tariffs if the bloc does not cut its growing deficit with the US by making large oil and gas trades. The EU this week imposed new sanctions on Russian oil as well as new measures against Russia’s “shadow fleet.” Prior to the overnight bounces, the market had been pressured by a report from Sinopec report yesterday in which they said that China’s crude oil imports could in 2025 and that the country’s oil consumption would peak as soon as 2027 as gasoline and diesel consumption weakens. JPMorgan said yesterday that is sees the global oil market moving from balance in 2024 to surplus of 1.2 million barrels per day in 2025, with OPEC+ supply increasing by 1.8 million bpd.
NATURAL GAS
February Natural Gas is approaching the 200-day moving average of 3.402 this morning. It has not closed above that line since June. The EIA gas storage report yesterday supported the rally with a draw of 125 bcf for the week ending December 13 versus expectations ranging from draws of 115 to 129. This was not as big as the 190 bcf draw the previous week, but two straight weeks of substantial draws have allowed the surplus to year ago and five-year averages to narrow significantly. This week, storage was up 1.3% from a year ago and 3.7% above the five-year average and was the smallest surplus to a year ago since early 2023. However, storage is still at its highest level for this time of year since 2020. LSEG reports that US LNG exports in 2024 are set to average 13.0 billion cubic feet per day, down from 13.1 billion in 2023 and the first decline since the US started exporting LNG. They blame numerous plant outages this year and a slowdown in construction of new plants due to budget overruns and labor shortages. However, the forecast also calls for feedgas supplies to US export facilities to increase roughly 2 bcfd next year, which may help reduce US oversupply and build a case for higher prices next year. Turkey and Hungary said they have received exemptions for gas payments to Russia after the US imposed sanctions on Gazprombank, removing a major hurdle to trade with Moscow. The near term forecast for the US is still mild, with the NWS 6-10 and 8-14-day outlooks calling for above normal temperatures across the lower 48, but the European model’s 46-day forecasts show an increase of 2.1 heating degree days.
PRODUCT MARKETS
February RBOB is close to testing the December low of 1.9040, and a move below there would leave next support at 1.8891.
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