Saudi Arabia has spoken. According to an exclusive from the Wall Street Journal Saudi Arabia plans to extend Oil-production cuts. The WSJ reports that Saudi Arabia is averse to a price war with US shale and they aim to keep prices elevated rather than chase market share, sources say. This comes as oil had its best gain in 2 weeks.
The reports shows that Saudi Arabia is keen in keeping the market tight on the belief that they will be rewarded in the future for their fiscal and production sacrifices. The Saudi’s must believe that demand will exceed current damped down expectations. They must expect that this demand increase will allow them to profit from a period of sustained higher prices for longer.
They are also betting that non-OPEC production has some upside limits in the short term even with President Trump’s ‘drill baby drill’ philosophy. In other words, the Saudis are betting that the potential growth that we will see from the President Trump policies will be enough to drive global demand and keep the Kingdom (TADAWUL:4280) of Saudi Arabia fat and happy.
Technically the WTI oil needs a close above $70 a barrel to shake off the ghosts of its bearish past and break out of this trading range of 6650 to 6990.
Last night the American Petroleum Institute seemed to be playing catch up on Gas supply while oil came in line with expectations. The API showed a substantial 4.623-million-barrel increase in gasoline supplies. A lot of that of course with Gasoline going up on the rack ahead of the Thanksgiving Day travel holiday which was supposed to break records but maybe the snow slowed things down a little bit.
On the oil side, they showed a slight increase of 1.232 million barrels and on diesel an increase of 1.014 million barrels.
The gasoline crack spread looks like it’s trying to bottom here. It would usually get a little bit of an uptick on that spread as we get into the month of December. They must keep the refiners interested in gasoline.
Wednesday's report will give us confirmation of a bottom or put us back in the tight trading range.
The UK is looking to delay the closing of some nuclear power plants as an early winter and a failure of their wind turbines to create enough electricity has the country thinking twice. Reuters reports that, “EDF will extend the life of four of its British nuclear plants and invest 1.3 billion pounds ($1.64 billion) in its British fleet over 2025-2027, it said on Wednesday, in a boost for the country’s energy security and efforts to meet its climate targets. Britain has a target to decarbonize its electricity sector by 2030 and reduce its reliance on fossil fuel gas power plants which currently provide around a third of its power. Hint – they can’t do that without expanding nuclear)
China is also adding nuclear power to prepare to power their data centers and their country. Bloomberg is reporting that, “China could approve another 100 nuclear reactors over the coming decade, according to an industry lobby group, as the nation turns itself into the world’s biggest operator of atomic power and potentially a major exporter of the technology. Bloomberg writes, “After greenlighting a record 11 reactors so far in 2024, Beijing could commit to a “realistic target” of 10 new approvals each year through 2035, Tian Jiashu, deputy secretary-general of the Chinese Nuclear Society, said at the Bloomberg NEF Summit in Shanghai on Tuesday.
Bloomberg says that, “Such a rate of expansion would see China’s nuclear power capacity almost quadrupling to 200 gigawatts by 2035, enough to meet 10% of electricity demand, Tian said. It could then double to 400 gigawatts by 2060, supplying 16% of total consumption at that point.
Here in the US, President Trump should also look to expand nuclear energy. While he worries about the cost, the benefits over the long run should make it worthwhile. The OECD is bullish on America as they raised the 2024 US growth forecast to 2.8% (2.6% previously), raises 2025 to 2.4% (from 1.6%) sees 2026 at 21%.
I know you don’t feel like it, but the natural gas market is feeling all warm and fuzzy. Natural gas prices are pulling back and there are reports of warmer than normal temperatures coming soon to a city near you.
EBW Analytics reports that, “A hazy pre-Thanksgiving bearish picture for natural gas came into sharper focus with clearer visibility into a mild mid-December weather backdrop and rising supply—crashing the January contract 45.8¢ (-13%) in the past week. Over the next 7-10 days, downside momentum may extend—albeit at a more gradual pace—as gHDDs retreat, modest production freeze-offs return, and Henry Hub spot pricing turns lower. Technical favor sub-$3.00/MMBtu pricing.
At a high level, Lower 48 storage may end the first week of December near 3,800 Bcf, Canadian storage is at a record, production is elevated, and a mild weather outlook lies directly ahead—all pointing in a bearish direction. Still, the first week of December is too soon to call the end of winter—and the market is liable to overreact to any severe cold threat over the next 30-45 days.