Written Commentary
CRUDE OIL
October Crude Oil was higher early Wednesday and managed to close the gap from July 24. The market has gained this week as hopes for a reopening of the Strait of Hormuz have faded, but it hasn’t seen the type of blockbuster rally that would indicate panic. So far, it has avoided a return to the highs from earlier this year, as Gulf producers have worked to sidestep the strait by moving as much oil as possible to other ports via pipeline or ship to ship transfers, by ships turning off their transponders as they attempted to cross the strait, and by US and IEA pulling supplies from strategic stockpiles. President Trump said on Tuesday that no talks were taking place with Iran and insisted the strait was open, but Iranian leaders said that the waterway remained closed.
PRODUCTS
October RBOB was approaching its contract high from July early Wednesday, and October ULSD traded to a new contract high for the third straight session, as tight product supplies both in the US and globally continue to support these markets and strengthen refining margins. Crack spreads are at record highs and US refineries are running a near-record levels.
NATURAL GAS
October Natural Gas was higher for the second straight session early Wednesday. The lack of LNG shipments out of the Persian Gulf is keeping global supply tight, and this seems to be supporting the US market, even if US LNG exports are already close to capacity. Gas Infrastructure Europe reports that EU gas stocks are 61.37% full, the lowest for this time of year in records going back to 2011 and 12.5 percentage points behind last year. US gas output continues at a record rate, with LSEG reporting average gas output in the lower 48 states reaching 111.6 billion cubic feet per day so far this month, beating the record of 110.7 bcfd in July.
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