Cutout Strength Supporting Cattle Futures — Market Talk

Energy stocks were lower late Tuesday afternoon, with the NYSE Energy Sector Index down 0.1% and the Energy Select Sector SPDR Fund (XLE) easing 0.2%.

The Philadelphia Oil Service Sector index added 0.6%, and the Dow Jones US Utilities index was down 0.6%.

Front-month West Texas Intermediate crude oil was rising 0.1% to $68.43 a barrel while the global benchmark Brent crude contract was down 0.1% to $72.05 a barrel. Henry Hub natural gas futures were adding 0.1% to $3.19 per 1 million BTU.

In corporate news, Enlight Renewable Energy shares rose 1.3% after the company said it has started commercial operations at its 94-megawatt Pupin wind farm in Serbia.

TotalEnergies said Tuesday it completed its acquisition of the interests of OMV and Sapura Upstream Assets in Malaysian gas producer SapuraOMV Upstream. TotalEnergies shares shed 1.2%.

ProPetro shares surged nearly 21% after it announced its new ProPetro Energy Solutions unit that will do business as ProPWR with a growth capital investment of about $122 million.

Chevron's Chevron USA unit said Tuesday that it has completed a retrofit of its Pasadena, Texas refinery, boosting its capacity to process lighter crudes by nearly 15% to 125,000 barrels per day. Chevron shares rose 0.6%.

WINNIPEG, Manitoba--The ICE Futures canola market made small gains on Tuesday amidst mixed sentiment in comparable oils.

Chicago soyoil and Malaysian palm oil were down while European rapeseed was up. Meanwhile, crude oil was slightly higher.

At mid-afternoon, the Canadian dollar was down more than one-tenth of a United States cent compared to Monday's close.

The U.S. Department of Agriculture released its monthly World Agricultural Supply/Demand Estimates earlier Tuesday. Its 2024-25 Canadian canola production estimate was lowered to 18.80 million tonnes from 20 million in November. That compares with Statistics Canada's current estimate of 17.85 million tonnes.

One analyst said farmers may not start selling canola until prices surpass the C$640 per tonne level.

There were 90,781 canola contracts traded on Tuesday, which compares with Monday when 60,310 contracts changed hands. Spreading accounted for 70,816 of the contracts traded. Settlement prices are in Canadian dollars per metric tonne.

 
           Price      Change 
Jan       621.70     up 3.00 
Mar       629.60     up 2.10 
May       636.20     up 1.10 
Jul       639.00     up 1.30 

Spread trade prices are in Canadian dollars and the volume represents the number of spreads:

 
Months    Prices                            Volume 
Jan/Mar   7.30 under to 9.50 under          21,371 
Jan/May   13.60 under to 16.10 under           707 
Jan/Jul   17.60 under to 18.40 under             9 
Jan/Nov   9.20 over to 6.00 over               706 
Mar/May   6.20 under to 8.00 under           7,369 
Mar/Jul   9.10 under to 10.80 under             29 
Mar/Nov   16.60 over to 14.30 over              85 
May/Jul   2.40 under to 3.00 under           2,963 
May/Nov   23.00 over to 22.50 over              81 
Jul/Nov   26.00 over to 23.90 over           1,317 
Nov/Jan   4.40 under to 6.60 under             430 
Nov/Jul   3.30 over to 11.90 under              13 
Jan/Mar   0.90 over to 3.10 under              239 
Mar/May   3.20 over to 4.00 under               57 
May/Jul   8.40 over to 1.50 under               32 
 

Source: Commodity News Service Canada, news@marketsfarm.com

January WTI crude oil (CLF25) Tuesday closed up +0.22 (+0.32%), and January RBOB gasoline (RBF25) closed up +0.0043 (+0.22%).

Crude oil and gasoline prices posted modest gains on Tuesday. Crude prices rose Tuesday on carryover support from Monday when the Chinese government pledged to revive the economy, which will be positive for energy consumption. Oil prices are also seeing support from turmoil in the Middle East after rebels toppled the government of Bashar al-Assad in Syria. Tuesday's stronger dollar limited gains in crude prices.

Oil prices are seeing support from the promise of additional stimulus measures in China. The Chinese Politburo, the ruling Communist Party’s most senior 24 officials led by President Xi Jinping, announced that it would embrace a "moderately loose" strategy for monetary policy next year and vowed to be "more proactive" on fiscal policy, a sign of further easing ahead.

Strength in the crude crack spread is supportive of crude prices. Tuesday's crack spread rose to a 2-week high, encouraging refiners to boost their crude oil purchases and refine it into gasoline and distillates.

Tuesday’s weak Chinese trade news is a negative factor for global growth and energy demand prospects. China Nov exports rose +6.7% y/y, weaker than expectations of +8.7% y/y. Also, Nov imports unexpectedly fell -3.9% y/y, weaker than expectations of +0.9% y/y and the largest decline in 9 months.

A decline in crude oil held worldwide on tankers is bullish for oil prices. Vortexa reported Monday that crude oil stored on tankers that have been stationary for at least seven days fell by -12% w/w to 62.74 million bbl in the week ended December 6.

Crude found support last Thursday after OPEC+ pushed back a planned hike of its crude production by +180,000 bpd from January to April and said it would unwind its crude output cuts at a slower pace than planned. Also, the United Arab Emirates (UAE) said it will delay the planned 300,000 bpd increase in its crude production target from January to April. OPEC+ had previously agreed to restore 2.2 million bpd of output in monthly installments between January and late 2025. However, that is now pushed back until September 2026. OPEC Nov crude production rose +120,000 bpd to 27.02 million bpd.

Escalation of the Ukraine-Russian war is supportive of crude prices. Russia launched a new hypersonic missile into the city of Dnipro late last month, following Ukraine's expanded use of Western-provided long-range missiles against targets inside Russia. Also, Russian President Putin warned that Russia could strike “decision-making centers” in Kyiv with ballistic missiles. Last week, Putin also approved an updated nuclear doctrine that expands the conditions for Russia to use nuclear weapons, including in response to a conventional attack on its soil.

Crude demand in China has weakened and is a bearish factor for oil prices. According to data compiled by Bloomberg, China's Oct apparent oil demand fell -5.4% y/y to 14.07 million bpd, and Jan-Oct apparent oil demand was down -4.03% y/y to 14.00 million bpd. China is the world's second-largest crude consumer.

An increase in Russian crude exports is bearish for crude. Weekly vessel-tracking data from Bloomberg showed Russian crude exports rose by +570,000 bpd to 3.36 million bpd in the week to December 1.

The consensus is that Wednesday's weekly EIA crude inventories will fall by -1.50 million bbl, and gasoline supplies will climb by +1.75 million bbl.

Last Wednesday's EIA report showed that (1) US crude oil inventories as of November 29 were -5.0% below the seasonal 5-year average, (2) gasoline inventories were -4.3% below the seasonal 5-year average, and (3) distillate inventories were -4.8% below the 5-year seasonal average. US crude oil production in the week ending November 29 rose +0.1% w/w to a record 13.513 million bpd.

Baker Hughes reported last Friday that active US oil rigs in the week ending December 6 rose +5 rigs to 482 rigs, rebounding from the previous week's 2-3/4 year low of 477 rigs. The number of US oil rigs has fallen over the past two years from the 4-1/2 year high of 627 rigs posted in December 2022.

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policyhere.

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January Nymex natural gas (NGF25) on Tuesday closed down by -0.019 (-0.60%)

Jan nat-gas prices on Tuesday settled moderately lower on the outlook for warmer US weather, which will reduce heating demand for nat-gas and keep supplies well above average. The Commodity Weather Group said Tuesday that forecasts have shifted warmer for the eastern half of the US for December 15-19.

Warmer winter temperatures could keep US nat-gas supplies elevated, a bearish price factor. US nat-gas inventories as of November 29 are +7.8% above their 5-year seasonal average for this time of year, signaling ample nat-gas supplies.

Lower-48 state dry gas production Tuesday was 103.9 bcf/day (-1.7% y/y), according to BNEF. Lower-48 state gas demand Tuesday was 93 bcf/day (+1.5% y/y), according to BNEF. LNG net flows to US LNG export terminals Tuesday were 13.3 bcf/day (+1.1% w/w), according to BNEF.

A decline in US electricity output is negative for nat-gas demand from utility providers. The Edison Electric Institute reported last Wednesday that total US (lower-48) electricity output in the week ended November 30 fell -3.94% y/y to 74,881 GWh (gigawatt hours), although US electricity output in the 52-week period ending November 30 rose +1.76% y/y to 4,165,120 GWh.

Last Thursday's weekly EIA report was bearish for nat-gas prices since nat-gas inventories for the week ended November 29 fell -30 bcf versus expectations of -36 bcf and less than the 5-year average draw for this time of year of -47 bcf. As of November 22, nat-gas inventories were up +5.9% y/y and were +7.8% above their 5-year seasonal average, signaling ample nat-gas supplies. In Europe, gas storage was 82% full as of December 8, below the 5-year seasonal average of 84% full for this time of year.

Baker Hughes reported last Friday that the number of active US nat-gas drilling rigs in the week ending December 6 rose +2 rigs to 102 rigs, modestly above the 3-1/2 year low from September 6 of 94 rigs. Active rigs have fallen since posting a 5-1/4 year high of 166 rigs in Sep 2022, up from the pandemic-era record low of 68 rigs posted in July 2020 (data since 1987).

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policyhere.

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Energy stocks were mixed late Tuesday afternoon, with the NYSE Energy Sector Index up 0.2% and the Energy Select Sector SPDR Fund (XLE) easing 0.1%.

The Philadelphia Oil Service Sector index added 0.6%, and the Dow Jones US Utilities index was down 0.6%.

Front-month West Texas Intermediate crude oil was rising 0.1% to $68.43 a barrel while the global benchmark Brent crude contract was down 0.1% to $72.05 a barrel. Henry Hub natural gas futures were adding 0.1% to $3.19 per 1 million BTU.

In corporate news, Enlight Renewable Energy shares rose 1.3% after the company said it has started commercial operations at its 94-megawatt Pupin wind farm in Serbia.