Written Commentary
CRUDE OIL
No real change in the Mideast oil situation overnight, with talk of dire supply conditions continuing but November Crude not reaching new highs since Friday. The Houthis on Monday said they fired dozens of missiles and drones at a military air base in southern Saudi Arabia. This follows attacks from Iranian-backed fighters in Iraq on Friday that has forced a closure of the pipeline to the Red Sea. Yesterday there were estimates that Saudi Arabia could run out of crude available for export within days unless the pipeline resumes operations. Saudi leadership has asked the US to retaliate for the strikes, but so far President Trump has been reluctant. Over the weekend, the Houthis control over more land near the Bab al-Mandab straight, reducing Saudi Arabia’s ability to export out of the Red Sea even further. Russia and Ukraine continued their attacks on each other’s energy infrastructure overnight, with Russia hitting gas stations in Kyiv on Ukraine striking a Russian oil refinery.
PRODUCTS
Like crude oil, RBOB did not make new highs overnight, but ULSD did. Global diesel supplies are very tight due to Russia/Ukraine war and the Iran war, as refineries in Russia and the Persian Gulf have suffered damage and refineries in Asia are face limited crude oil inputs. Chinese oil throughput rose for a second straight month in August, but one has to wonder how long that will last given the shutoff of supplies from the Persian Gulf and now the Red Sea.
NATURAL GAS
November Natural Gas pushed above 50-day moving average for only the fourth time since June early Tuesday, which may give the bulls hope that the market is finally putting in a long-awaited low. LSEG said average gas output in the lower 48 states are running around 113.4 billion cubic feet per day (bcfd) so far in September, up from a record of 112.2 bcfd in August, but daily output was on track fall to 112.8 bcfd on Monday, its lowest level in two weeks. The NWS 6-10 and 8-14 day maps show above normal temperatures across most of the lower 48, but at this time of year, that points to only limited cooling demand and reduced heating demand, so it may not do much to lower storage levels. However, the hotter-than-normal weather last week may have helped lower supply somewhat, as it was hot enough to run air conditioners in some areas.
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