Written Commentary
CRUDE OIL
December Crude Oil was moderately higher early Wednesday after falling to its lowest level since September 8 on Tuesday and rejecting that move. News that Mideast oil flows have reached about 85% of pre-war levels in recent weeks has a bearish factor, but reports of attacks on ships in the Strait of Hormuz this week are another reminder that war brings uncertainty. The Houthis attacked the Yemini city of Aden’s international airport with ballistic missiles and explosive-laden drones on Wednesday. This week, Yemeni government forces launched a counter-offensive to recapture strategic territory near the Bab al-Mandab Straight. A tropical storm forming in the Gulf of Mexico and heading towards Louisiana and Mississippi has the potential to become a hurricane but the time it lands on Friday. The storm is forecast to pass through offshore areas with oil and gas production facilities and onshore areas with major refineries. The offshore areas in the storm’s path produce 15% of US crude oil and 5% of the country’s natural gas.
PRODUCTS
President Trump said on Tuesday he was thinking about suspending the federal gas tax. This won’t increase supply. This comes after he signed an executive order to expand access to tax-exempt diesel for transportation use, in addition to the normal tax-free status for agriculture use.
NATURAL GAS
November Natural Gas was higher for the fourth straight session as the market claims back what it lost on the selloff from the September high. US production has slowed down this month due to problem with pipelines in Kentucky and West Virginia, and some extreme heat in the western US is supporting cooling demand. Out ahead the picture is mixed, with above normal temperatures dominating the lower 48 states in the 6-10 and 8-14 day forecasts, which ill likely limit heating demand. A tropical storm in the Gulf of Mexico could form into a hurricane by Friday before it makes landfall. The storm is forecast to pass through offshore areas gas production facilities and onshore areas with LNG loading platforms. The offshore areas in the storm’s path produce about 5% of the country’s natural gas. Typically, hurricanes are viewed as negative for natural gas prices because they pose a bigger threat to power consumption and LNG loading than they do for production.
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