Bridging the Gap. The Energy Report 10/29/2024

Bull and bears will have to bridge the gap. In technical analysis there is an old saying that gaps are meant to be filled. The big gap down on Sunday night is now a target for traders regardless of what they think might happen after that. Depending on how you measure the gap it should be filled 6996. Yet the sharp break in oil after Israel spared Iran’s oil infrastructure was driven by emotion and if we can keep the war section out of the equation, oil under $70.00 a barrel is cheap in today’s world.

On top of that the market reaction already may have derailed the OPEC Plus plan to slowly bring some barrels of oil back on market. This comes as the bullish bets on oil are at the lowest level in 14 years, Those placing these bets seems to believe that we’re going to go into an oversupply situation with oil. They’re counting on the fact that U.S. oil production is going to surge and that OPEC will bring on barrels back to the market. If OPEC doesn’t bring the barrels back up and if we don’t see this expected surge in the US oil output, then we will have to see the market adjust to that situation.

The market is also saying that Israel’s very successful strike on Iran makes it unlikely that Iran will have the gumption to fight back. Today Iran’s UN envoy said that Iran reserves its inherent right to respond at a time of its choosing to Israel’s attack. They also said that the US government is complicit in Israeli aggression and it will bear its consequences. Now, even though Iran claims that they will respond to Israel’s attack, and they were also lashing out of the United States for enabling Israel, the reality is that Iran should have got the message that they can’t stand up to Israel or the United States militarily.

In a must read, the Wall Street Journal reported that, “Israel’s airstrikes early Saturday didn’t just destroy critical Iranian military infrastructure. They also battered the reputation of Russian military equipment, which has already been pummeled by poor performance during Moscow’s invasion of Ukraine. Iran’s Russian-made air-defense equipment stopped few if any of the missiles that Israel launched from 100 jet fighters, according to U.S. and Israeli officials. Among Iran’s losses in the strikes were its three Russian S-300 air-defense systems. Israel earlier this year hit Iran’s only other S-300.” The US for their part told the UN they believe that this is going to be the end of a direct exchange of fire between Israel and Iran.

Today we’ll get the American Petroleum Institute report. We’re looking for a drawdown in inventories. Last week we saw build in the Energy Information Administration report because of a big surge of imports that may influence the oil number, but product should continue to fall.

Natural gas took it on the chin yesterday partly because of some sympathy selling with oil but also because of a change in the long-term weather forecast that said the cold front may not be as cold as originally anticipated. European natural gas prices have eased a little bit. Natural gas producers know that they need cold weather to avoid this market sinking into a supply glut. In Europe  it is being reported that Nat gas   2.9% TO €43.75/MWH,  a new high 2024 HIGH

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