Written Commentary
Ag Market View for Dec 13.24
December 13, 2024
CRUDE OIL
August Crude broke out of a six-day consolidation zone last week and held those gains overnight. Crude oil traders are weighing geopolitical risks and stronger US demand against indications of lower Chinese demand. The EIA reported on Friday that US oil production in rose by 72,000 barrels per day in April to 13.25 million bpd, which was the highest since December. However, product supplied of crude oil and petroleum products (EIA’s measure of demand) increased by 131,000 bpd in April to 20 million, the highest so far this year. Demand was about 500,000 bpd above forecast in the EIA’s Short-Term Energy Outlook report from mid-June. LSEG research said Asia imported 27.16 million barrels per day of crude oil in the first half of the year, down 130,000 bpd from the same period last year. They said it was mostly due to lower arrivals in China that were only partially offset by increased for India. This undermines forecasts by OPEC forecast that China’s demand would increase by 720,000 bpd this year and IEA’s forecast for it to increase by 500,000. LSEG says China imported 11.08 million bpd in the first half of the year, down 300,000 bpd from the same period io 2023. Part of this is due to higher domestic production, which was up 140,000.
PRODUCT MARKETS
August RBOB is holding its uptrend off the June lows, as the trade expects summer driving demand to tighten supply. The EIA report showing US demand in June coming in above forecasts is also supportive. Friday’s Commitments of Traders Report showed managed money traders were net buyers of 6,903 contracts of RBOB for the week ending June 25, increasing their net long to 34,075. This was the first weekly increase since April 9, when the net long peaked at 94,926. This will have the trade wondering of this is the start of a new buying trend. August ULSD looks less bullish technically, but it is holding its uptrend.
NATURAL GAS
August Natural Gas extended last week’s losses overnight to trade to its lowest level since May 13. A cooler forecast for the northern Plains and western part of the Midwest coupled with ample domestic supplies have increased selling pressure. Weather forecasts are calling for declines in both cooling and heating degree days, which is lowering demand expectations. The EIA report last week showed US gas storage was 11.3% above a year ago and 20.6% above the five year average. On the bullish side, US lower 48 natural gas production fell for a second month in a row in April to 114.0 billion cubic feet per day, down from 114.9 bcfd in March and from the record 118.2 in December. Texas’ output fell to a three-month low of 34.6 bcfd, and Pennsylvania’s reached at two-month high of 19.5. In December, Texas and Pennsylvania reached record highs of 35.0 and 21.9 bcfd, respectively. Beryl, the earliest Category 4 hurricane on record is heading toward the southeast Caribbean and is not expected threaten the US Gulf Coast.
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