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Energy Brief for Nov 29.23

by market analysts Stephen Platt and Mike McElroy

Price Overview

The petroleum complex saw mixed trade but closed firm, with the January crude gaining 1.40 to settle at 77.86. Nervousness in advance of the OPEC meeting scheduled for Thursday was apparent. Reports that negotiations have been difficult due to disagreement on output quotas for African producers and previously agreed output increase for the UAE in 2024. Forecasts suggest stocks will begin rebuilding soon as increased production from non-OPEC producers and the potential withdrawal of voluntary output cuts in full or in part by Saudi Arabia and Russia currently totaling 1.3 mb/d would potentially be a negative influence on values if demand growth slows more than expected. Underlying support has been seen on export disruptions from Russia and Kazakhstan due to a severe storm in the Black Sea. This should only effect supply availability in the near term.

The DOE report also played a role in today’s price movement, putting pressure on values initially on a larger than expected build in crude and distillate inventories. The report showed crude stocks building by 1.6 mb, distillate up 5.2 and gasoline increasing by 1.8 mb. Expectations had pointed toward crude falling .9 while distillate and gasoline were forecast to increase .2 and .4 mb, respectively. Total stocks of crude and products rose 2.9 mb and total refinery utilization reached 89.8 percent compared to 87 last week but below 95.2 percent last year. Total product supply slipped to 18.9 mb/d compared to 20.0 mb/d the prior weekend and 19.7 mb/d last year. Offsetting the weak disappearance levels were substantial exports of crude and products which reached 4.4 mb.

DTN Jan24 Crude Oil chart for 11.29.23
DTN Jan24 Nat Gas chart for 11.29.23

The markets recovery following the DOE report reflects increased nervousness into the OPEC meeting scheduled for tomorrow. Expectations point to rolling over of the current production cuts with minor modifications for African producers and the 1 mb voluntary cut by Saudi Arabia being extended. Such an outcome will provide a steady tone to values with an upside bias toward resistance near the 80-82 level basis January. Demand will need to recover above current expectations to provide additional upside initiative. The 100-day moving average on January crude rests near the 79.50 level.

Natural Gas

Another lower close was registered today as the January lost 3.3 cents to settle at 2.804. That followed yesterday’s 11 cent drop as the market has probed out a new low for 10 straight sessions. With HDD expectations remaining below average in the 15-day forecasts, the market is having a hard time finding any reason to rally. Production has remained near record levels to add fodder to the negative argument. The December contract went off the board yesterday at 2.706, and that area now marks initial support on further weakness. If that level doesn’t hold the next targed is 2.50. Despite the negative bent, the market has reached oversold levels with the RSI near 18 percent. Any sign of recovery could trigger short covering and technical trade that would exacerbate the bounce. No solid resistance will surface until the 3 dollar area, and then near 3.17 which would achieve a 38 percent retracement of the break.

The authors of this piece do not currently maintain positions in the commodities mentioned within this report.

Charts Courtesy of DTN Prophet X, EIA, Reuters

 

Learn more about Stephen Platt here

Learn more about Mike McElroy here

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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