Oil came under significant pressure yesterday with ICE Brent settling 3.35% lower on the day. The Saudi cut in official selling prices for February loadings would have done little to help sentiment with the reductions suggesting a softer market. If weakness persists it is difficult to see how OPEC+ would be able to make more meaningful output reductions, given the scale of their cuts already. What we are more likely to see if a rollover of current voluntary cuts into 2Q24 in order to erode the surplus expected next quarter.
Natural gas prices also saw plenty of weakness yesterday. TTF fell 8.44% yesterday and this is despite a cold snap across parts of Europe at the moment. European storage remains more than 84% full, which is very comfortable for this time of the year.
The Dutch government yesterday said it will resume minimal production at the Groningen gas field due to cold temperatures this week. This move which is referred to as “pilot light” allows minimal production to resume if average temperatures over a 24 hour period fall below -6.5 degrees Celsius . This is a preparatory step which would allow for actual production in an emergency situation. The Groningen gas field has seen output gradually reduced in recent years and finally stopped in October last year due to earthquake activity. While the field stopped producing it has been kept in operational mode in case supplies are needed.
On the calendar for today, the EIA will release its Short Term Energy Outlook, which will include its latest US oil production forecasts for 2024 and its first forecast for 2025. Last month the EIA expected US crude oil output to grow by 190k b/d in 2024 to a record 13.11m b/d. This will be followed by the API’s regular weekly US inventory report.
