Written Commentary
NATURAL GAS
January Natural Gas was sharply higher early Friday and reached its highest level since June 20. The 6-10 and 8-14 day forecasts show below normal temperatures in the eastern half of the US and above normal in the west, which supports natural gas consumption in at least half of the prime heating demand area. The market closed higher on Thursday despite a the weekly EIA storage report coming in at the bearish end of expectations, as the increase in heating demand off the wintry weather this week is not expected to show up until next week’s report. Thursday’s storage report had a net draw of 12 bcf for last week, smaller than the average expectation and one of the smallest for this week in the past five years. Storage remains in the upper end of the historic range. LSEG data suggest that both domestic production and US exports have moderated slightly in the first few days of December, but they are still running at near record levels. Average gas output in the Lower 48 states has fallen to 109.4 billion cubic feet per day (bcfd), down from the record 109.6 bcfd in November, and average gas flows to the eight large LNG export plants operating in the US have dropped to 18.0 bcfd from a record of 18.2 bcfd in November, both offsetting each other.
CRUDE OIL
January Crude Oil was near unchanged early Friday as traders weighed the lack of progress on Ukraine/Russia peace talks against Putin’s trip to India where he is pushing for India to resume buying Russian crude oil, among other things. A week ago, the prospect of peace in Ukraine raised the possibility of a lifting of the sanctions against Russia and more Russian oil reaching the global market. Up until recently, Inda had been buying Russian oil, but the latest round of US sanctions against Russian oil producers Lukoil and Rosneft had cause India to suspend their purchases. India’s crude imports are set to hit a three year low this month. The fact that Indian Prime Minister Modi welcomed Putin with open arms suggests India will consider resuming its purchases. Markets also wonder about the prospects of a US military incursion into Venezuela. Venezuela currently produces around 1.1 million barrels per day, most of which goes to China. Saudi Arabia has cut its official selling price to Asia to its lowest level in five years. Congressional lawmakers on Thursday voted to repeal a Biden-era policy that limited the amount of land in an Alaska wildlife refuge that could be leased for oil and gas development.
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