Brown Loafers. The Energy Report 09/27/2024

In the world of commodities,  oil is a brown loafer in a world of tuxedos, to steal a line from the late Geoge Gobel.
After China unleased its massive stimulus, the Chinese stock market soared along with almost every commoity from copper and aluminum zinc grains and steel rebars, yet oil languishes on the heels of a dubious story that Saudi Arbia is going to abandon a $100 a barrel price target that they never had in the first place.

Oil also bought into the possibility that Saudi Arbia would start a production war to regain market share that, they have been regaining anyway as US shale output goes flat.

This come as OPEC over producers are reigning in over production and making good on promises to make compensation cuts on previous over production in the past.

So, for Saudi Arbia to start a production war now would be like punting on third down on the goal line. It would not make any sense.

Oh yes, there will be an increase in production in December, but as former OPEC cheaters make compensation cuts the increase will only reflect the seasonal uptick in oil demand and not substantially build global oil inventories.
In fact, the net increase might only be about 300,00 to 500,000 barrels a day and that should keep us in a supply deficit and would not lead to any increase in global oil inventories in fact quite the opposite.
Pointed out earlier this week global inventories are tightening significantly it’s almost like there is a concerted effort to keep oil prices low and they were pulling out all the stops to do so. As we pointed out the hedge funds have been heavily on the short side of the market.

Yet we are seeing some signs that the markets getting ready to turn for example the crack spreads especially in diesel have started to turn and had a pretty good day yesterday even though oil was under pressure we also saw an uptick and the gasoline crack spread is as well. And while the market has been technically broken, we believe that the fundamentals ultimately will rule the day and oil prices have a chance to turn around the same way the copper market did in recent days.

The impact of hurricane Helene um energy demand has been substantial.  Over a million people in Florida were without power after this storm hit.
Fox Weather Reported that Helene continues to weaken and is now a tropical storm after it made landfall along Florida’s Big Bend region late Thursday night as a powerful Category 4 hurricane, unleashing deadly effects on the Southeast including destructive hurricane-force wind gusts, an “unsurvivable” storm surge and torrential, flooding rain.

At least two people have reportedly been killed because of the storm in Wheeler County, Georgia, after a mobile home was damaged during one of the many Tornado Warnings that were issued. According to a report from FOX 5 in Atlanta, a third death in Georgia is also being investigated after reports of a vehicle that crashed into a tree in Colquitt County.

And at least one person was killed in Florida after a crash on Interstate 4 in the Tampa area that involved a highway sign on top of a vehicle. Helene made landfall about 10 miles west-southwest of Perry, Florida, at 11:10 p.m. ET Thursday, and impacts have been felt across the Southeast and into portions of the Mid Atlantic. T the monster storm pushed farther inland and began to weaken.
While wind does remain a concern, the greatest threat from Helene continues to be the flash flooding as torrential rain falls across the region, sending rivers and streams out of their banks, onto roads and into communities, trapping residents according to Fox Weather, Download the Fox Weather ap to keep up with the latest because Hurricane season is not done.

The concerns about oversupply in the natural gas world are real but easing a bit. Producers have been warning about the possibility of a supply glut as big producers in associated gas producers can’t seem to restrain themselves when it comes to producing more natural gas.
Scott Disavino at Reuters writes that “U.S. energy company EQT (EQT.N), opens new tab plans to reverse some natural gas production curtailments in October and November as demand for the fuel and prices increase, CEO Toby Rice told Reuters on Wednesday.

EQT, the biggest U.S. gas producer, has along with other U.S. drillers curtailed output in 2024 after prices collapsed to multi-year lows in the spring following a mild winter that left a tremendous oversupply of fuel in storage.

Yet John Kemp points out that “US natural gas stocks are still rising much more slowly than average for the time of year as low prices encourage maximum consumption by generators. Inventories were just 226 billion cubic feet (+7% or +0.80 standard deviations) above the prior ten-year seasonal average on September 20 with the surplus shrinking from 538 bcf (+20% or +1.44 standard deviations) as recently as July 5. Stocks are on course to start the winter of 2024/25 at a plentiful but not excessive level.

So, in other word if we get a cold winter, it might challenge the notion of oversupply. Yet if we do not the possibility of a glut will come back into focus.  WE Also need the government to stop with these LNG export reviews as it is doing harm to the US gas industry and down the rad the global economy.

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