Written Commentary
CRUDE OIL
December Crude Oil is higher this morning, finding support from a bullish API stocks report, an escalation of hostilities in the Russia/Ukraine conflict, and indications that India will limit its purchases of Russian oil. After a relatively quiet start to the week, Russia and Ukraine launched heavy missile attacks overnight. Diplomatic efforts to end the war have faltered, with the White House saying there were no imminent plans for Trump to meet with Putin in the near future. President Trump said he spoke with Indian Prime Minister Narendra Modi on Tuesday, adding that Modi assured him India would be limiting its oil purchases from Russia. There has been no official confirmation from India, but there have been unofficial reports in recent weeks that Indian buyers were not committing to buying Russian oil for the time being. After saying on Monday that he expected to work out a trade deal with Chinese President Xi Jinping next week in South Korea, yesterday he said the meeting might not happen. This reinjects concerns about demand. Reuters reports that API crude oil stocks were -2.98 million barrels for the week ending October 17 versus an average an average trade expectation of +1.2 million.
NATURAL GAS
December Natural Gas extended this week’s recovery rally overnight to reach its highest level since October 8. The weather forecast has shifted towards a more normal pattern this week from the predominantly warmer than normal temps of recent weeks. The 6-10 day still has above normal temperatures in the northern Midwest and Great Lakes, but near normal temps are expected along the eastern seaboard and in the Plains. The 8-14 day has normal temps moving in most of the Midwest. On the whole, normal and warmer than normal predominate, but this still leaves room for a more normal heating consumption pattern, and “normal” this time of year means temps will get lower and heating demand will increase. US production and exports have had a more bullish tone this month.
PRODUCTS
Products following crude oil higher this morning despite what could be a bearishly-construed API report last night, which US gasoline stocks -238,000 barrels last week versus expectations for a -800,000, and distillate stocks -974,000 versus -1.9 million expected. The EIA report will be released this morning. The API told federal lawmakers that it opposes legislation expanding sales of fuels with higher ethanol blends, which is a reversal from their previous position. The bill in question would allow for gasoline blended with up to 15% ethanol (E15) to be sold year-round in more states.
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