Oil is down $3 this morning to $70.80, reversing last week’s gains
The NYMEX gasoline crack spread, which represents refinery margins, is now the weakest since early November
Rebalancing of several large commodity indices will occur this week with the Bloomberg Commodity Index and S&P GSCI Index expected to sell about 27k contracts of WTI
Saudi oil price cuts highlight softer spot market (BBG)
Saudi Arabia cut the official selling price to Asia for their flagship Arab Light crude to a $1.50/Bbl premium to the regional benchmark for February, which is the lowest level since November 2021
The price cut follows a trend of weakening spot differentials for Middle Eastern crudes amid weak Chinese demand and high global oil supply
Vortexa’s lead Asia analyst said, “Amidst the weakening of the global economic outlook and the fading of seasonal demand strength, it has not come as much of a surprise that Saudi is cutting its OSPs so deeply”
Speculators start 2024 with a large increase in bearish bets on oil (BBG)
Managed money participants made one of the biggest positioning shifts in oil in several years, as they added 61k short positions in Brent and WTI, according to CFTC data
This increase in bearish positioning comes as oil prices have started the year on a weak note and following the first annual decline in oil prices since 2020
Natural gas prices trade lower despite cold weather outlook
February ’24 Henry Hub lost 17.1c this morning to trade around $2.722 /MMBtu
The Winter ‘23/’24 strip is down 13.3c to $2.617, and the Summer ’24 strip is down 9.8c to $2.689
The weather model indicates colder temperatures east of the Rockies, especially in the Midwest and Southeast, with a return to 10-year normal in the next two weeks
Lower 48 natural gas production fell to 102.56 Bcf/d this weekend, with a 0.37 Bcf/d decrease from last week, mainly due to declines in the South Central and Rockies regions (Criterion)
Oil and gas rig count in the US hovers around a 25-month low (S&P)
The US oil and natural gas rig count marginally rose to 677 as of December 27, slightly recovering from a 25-month low from the prior week
This count reflects a 24% decrease from the post-COVID pandemic peak of around 890 rigs
In the Permian Basin, rig count dropped to 311, the lowest since April 2022, while Eagle Ford fell to 53 rigs, while Bakken, Denver-Julesburg, and Powder River basins remained stable.
Gas-directed drilling in the Marcellus and Utica shales stayed constant at 25 and 10 rigs, respectively, while Haynesville shale rose to 58 rigs, the highest since mid-June
The overall slowdown in drilling activity comes amid a bearish outlook for natural gas prices, driven by record production, high inventories, and a mild winter
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