DMU: December 5, 2023
Analysis of the latest trends in oil and natural gas markets, including OPEC+ decisions, macroeconomic factors, geopolitical influences, and EIA inventory data.
On Today’s Daily Market Update:
Despite OPEC's recent production cut announcement, prices dropped, led by declines in domestic products and Brent. WTI's January contract fell to $75.96, with Cal 24 and other term structures also seeing reductions. This reaction highlights market skepticism regarding OPEC's influence on global balances, further complicated by reductions in the Saudis' Official Selling Prices (OSP) to Asia and Europe for January 2024. These developments, along with consistent large complex builds reported by the API, present challenges for market bulls, while bears ponder the potential for further declines.
The natural gas market saw a minor reprieve from its downward trend, with the prompt NYMEX contract slightly up, closing at $2.71. Cooler weather forecasts and weak wind generation in Texas contributed to this stabilization. However, the market remains cautious, balancing these factors against ongoing warm temperatures and strong production. With LNG feedgas demand expected to increase in 2024, there's anticipation for a potential rally, yet skepticism persists due to recent El Niño patterns and memory of the 2015-2016 winter. This context creates a unique opportunity for both consumers, to lock in favorable prices for the next year, and producers, to strategize on risk reduction and cash flow management in the face of evolving market dynamics.
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