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The Energy Report

Phil Flynn
http://www.pricegroup.com/
pflynn@pricegroup.com


Bull Headline. The Energy Report 11/20/2024

Oil prices were showing signs of an oil bottom but were temporarily thwarted on a bull headline. Ok, maybe not a bull headline but one that caused oil prices to make a sharp drop of over a dollar a barrel in a matter of seconds. The headline that caused the algo computers to go all red was, “Iran agrees to stop producing near bomb-grade uranium to allow experienced inspectors to verify – IAEA”. Of course, you can’t judge a book by its cover nor can you trust the headline.

The oil market came back when those who read the Wall Street Journal’s (WSJ) version of the whole story came away with a much different impression than the headline had the market believe. In fact, if the wire services led with the WSJ “Iran Sharply Expands Stockpile of Nuclear Fuel Ahead of Trump’s Return” you may have got a dollar breakup rally. So, it is a little curious as to who releases these headlines and so often at critical oil resistance points. And it’s amazing how quickly the computers can move the market milliseconds after the headline is released.

The impression that Iran is seeking a declaration may not be the case. The WSJ wrote that Iran’s decision to expand its stockpile of nuclear fuel and its failure to fully cooperate with the International Atomic Energy Agency, the IAEA, which monitors Tehran’s work, is set to trigger fresh diplomatic pressure from Europe. “Concerns are growing in Western capitals that Iran could decide to develop a nuclear weapon, after comments by senior Iranian officials that Tehran has mastered most of the techniques for doing so. Israel’s hollowing-out of Hezbollah, Iran’s most powerful proxy in the Middle East, has also prompted a public debate in Iran about whether the country’s best form of deterrence lies in having an atomic bomb. Iran has always claimed that its nuclear work is solely for peaceful civilian purposes.

As far as peace, Bloomberg is reporting that, ‘Vladimir Putin rules out major territorial concessions in any talks with US President-elect Donald Trump on a cease-fire in Ukraine, but the Kremlin could agree to freeze conflict along front lines. Reuters reports, citing five unidentified, current and former Russian officials. There may be room for negotiation over carve-up of four regions of Donetsk, Luhansk, Zaporizhzhia and Kherson, Reuters reports, citing three of the people. Yet it’s clear that headline or no headline the market has a bit of resistance to break back above $70. Yet the charts show strong bottom signals and a break above $70.00 may be the catalyst for starting a longer-term trend.

The American Petroleum Institute (AP)I signaled that gasoline demand is improving as supplies fall yet again to multi-year lows. The January gasoline crack spread hit the highest level of the year as API reported that gasoline supply fell by about 2.48M barrels, while distillate inventories including the soon to be used heating oil, fell by 688,000 barrels. The fact that product inventories fell further below average for this time of year overshadowed that U.S. crude inventories rose by about 4.75M barrels.

The bears are still focused on Chinese demand. It seems to me that China’s demand for oil is being fed internally as they draw down inventories. It also seems to me that the bearish argument that electric cars are cutting into China’s demand for oil but what’s interesting is that China electricity demand is going through the roof and they have to use more coal to power their electric grid.

John Kemp Energy reported that CHINA’s thermal electricity generation (nearly all from coal) increased to a seasonal record 477 billion kilowatt-hours (kWh) in October up from 465 billion kWh in the same month in 2023 and 445 billion kWh in 2022. Wind and solar generators produced record amounts of power, but hydro output slipped, and increased thermal generation was needed to satisfy the continued growth in load. So, it’s dubious to assume that there is gaining much of a positive impact on the environment.

With President Trump in office, there’s hope not only for US energy producers but also for Canada has seen some of the prices of their oil and gas fall to historically low levels partly because of the inability to transport it effectively with President Trump back in office. Alberta might make natural gas great again.

The EIA reported Northwest U.S. and western Canadian natural gas prices traded at historic lows in 2024. Monthly average natural gas spot prices at northwestern U.S. and western Canada border pricing hubs reached historic lows in 2024 through October, according to data from Natural Gas Intelligence. Robust natural gas production in western Canada, where output has generally increased over the last two years, and high natural gas inventories in the region contributed to the low prices.

Winter storms are back giving natural gas a pop over $3.00 in the Henry Hub. Producers are hoping for an old-fashioned Christmas and a very cold one. EBW warns that, “Bullish momentum may be running out of steam, however. Key resistance at $3.07 may represent a crucial inflection point. If building cold can lift prices higher, sizable speculator short covering could amplify any rally. More likely, however, is that current conditions—showing both forecast cold in the 11-15 day window yet production still held down by spot gas prices near $2.00—may foreshadow losses if either projected cold fades or supply surges.

Longer term, the fundamental outlook is dominated by storage nearly 400 Bcf above average across North America and production poised to push higher. Absent colder winter weather, renewed selling pressure appears favored.



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Phil is one of the world's leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide.

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Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

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