Written Commentary
CRUDE OIL
Crude Oil was sharply higher on Thursday on the escalation of hostilities between the US and Iran that has been supporting the market all week. October Crude Oil traded to a new contract high for the third straight session, and the nearby contract reached its highest level since May. Reports that advisors to President Trump have quietly warned him that the war could last through his term added to concerns that no end was in sight to end the conflict and restore “normal” flows out of the region. Even Trump said that the war will likely last beyond the November midterm elections. Iran said it had attacked 10 ships near the Strait of Hormuz on Wednesday, after the US sank five Iranian oil tankers, and the Houthis reportedly seized control of the historic port city of Mocha gaining further leverage over the Bab el-Mandeb Strait out of the Red Sea. China, which has been largely absent from the market since the start of the war, has reportedly stepped up buying recently.
PRODUCTS
October ULSD led the products higher overnight, reaching a new contract high for the second straight session, while October RBOB lagged a bit but managed to make a new contract highs. Tight global diesel supplies and record prices continue to lead the product storylines, although gasoline supplies are also tight.
NATURAL GAS
October Natural Gas was lower again early Thursday after failing to take out last week’s two month high earlier this week. US gas production remains at record levels, which is apparently enough to offset elevated cooling usage and increasing LNG outflows. LSEG said average gas output in the US lower 48 states are averaging 113.5 billion cubic feet per day (bcfd) so far this month, up from record 112.2 bcfd in August. The 6-10 and 8-14 day forecasts show a mix of above normal temperatures (mostly in the south) and normal to below normal (in the north) but with a wider area of above normal in the 8-14 day.
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