Giving Back Yesterday’s Gains in Nat Gas

CRUDE OIL 

February Crude Oil extended its recent rally overnight to trade to its highest level since November 7, but it has since backed off from that level. The market may have drawn some support from the China PMI  number, which at 50.1 for December may have initially been a disappointment since it was down from 50.3 in November and below trade expectations, but it was above 50 for the third straight month, which at least signals expansion in their economy. China’s crude oil imports for January-November 2024 fell 18% from the same period in 2023. If this trend continues through December, it would make 2024 the only annual drop in more than two decades, save for the Covid-affected years of 2021 and 2022. Analysts have said that Chinas imports could peak as soon as 2025 due to the country’s switchover to EVs and natural gas-powered trucks. For the US inventory report this week, an early Reuters poll calls for crude oil stocks to be -3.0 million barrels for the week ending December 27, with gasoline stocks expected to be +400,000 and distillates +3.5 million. Refinery runs are expected to be +0.1% to 92.6%. These guesses are preliminary and subject to change. The EIA report will be delayed to Thursday at 10:00 AM CST due to the New Year holiday. Yesterday’s Commitments of Traders Report showed managed money traders were net buyers of 21,693 contracts of crude oil for the week ending December 24, increasing their net long to 182,895.

 

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NATURAL GAS

March Natural Gas was lower overnight following a sharp rally yesterday that took the market to its highest level since June. The NWS 6-10 and 8-14 day forecasts show below normal temperatures settling in over the eastern two-thirds of the US , with much below normal temperatures covering a wide swath from Iowa to the East Coast to the Gulf Coast. This is expected to boost heading demand and perhaps bring about a deficit to year ago  levels in US supply for the first time in two years. LSEG is forecasting 499 heating degree days for the Lower 48 states over the next two weeks versus 399 on Friday. It has also forecast average gas demand for this week at 148.4 billion cubic feet per day versus 120.2 last week. They also said the amount of gas flowing to the eight big US LNG plants rose to an average of 14.8 bcfd so far in December from 13.6 bcfd in November. Cheniere Energy said that LNG was produced for the first time for the first train of the company’s new Corpus Christi Stage 3 Liquification project,  which will pull more supply from the US market.  Gazprom said it would pump a reduced volume of gas to Europe via Ukraine today, the last day before the transit deal expires. The remaining buyers of Russian gas in Europe, such as Austria and Slovakia, have found alternative supplies, and traders expect a minimal impact from the flow stoppage.  For the US storage report this week, an early Reuters poll calls for US natural gas supply to show a draw of 127 to 141 bcf last week. Yesterday’s Commitments of Traders Report showed managed money traders were net buyers of 62,199 contracts of natural gas for the week ending December 24, reducing their net short to 4,050.

 

PRODUCT MARKETS

ULSD led the petroleum complex for a change yesterday, as a forecast for much colder than normal temperatures across the eastern half of the US is expected to boost heating oil demand. Yesterday’s Commitments of Traders Report showed managed money traders were net buyers of 13,325 contracts of ULSD for the week ending December 24, reducing their net short to 18,809. This is up from a record net short two weeks prior. For RBOB, the COT reports showed managed money traders were net sellers of 10,737 contracts for the week ending December 24, reducing their net long to 56,366.

 

 

 

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