CRUDE OIL
February Crude Oil was slightly higher overnight with the market awaiting FOMC meeting results this afternoon. The trade is expecting a 0.25% rate cut, and will likely look past that number towards Fed dialogue about future cuts if the number comes in as expected. Yesterday afternoon’s weekly API report showed US crude stocks fell 4.69 million barrels last week versus expectations calling for a 1.6 million-barrel decline. Gasoline stocks were up 2.45 million, slightly higher than the +2.1 million expected, and distillate stocks were up 744,000 versus an expected increase of 700,000. The larger than expected decline in crude stocks may have had a greater impact had the trade not been focusing on the FOMC meeting. The trade is also waiting for this morning’s EIA data, which tends to be the final word. In addition to the stocks numbers, the trade is also looking for refinery runs to show a decline of 0.2% last week to 92.2%. Saudi Arabia’s crude oil exports reached 5.925 million barrels per day in October, up from 5.751 million in September and their highest in four months. Britain sanctioned 20 ships yesterday for allegedly carrying illicit Russian oil in its latest measures targeting the so-called shadow fleet. It also imposed sanctions on a trading firm alleging they enabled the trading of Russian oil. The firm said it suspended Russian trading in 2023. The Ifo (German) business climate index decreased to 84.7 in December from a slightly downwardly-revised 85.6 the previous month, which added to the pressure on the market yesterday.
NATURAL GAS
February Natural Gas saw a sharp bounce off its lows yesterday and was a bit higher overnight. Generally mild conditions across the US remain a key source of pressure. The NWS 6-10 day shows below normal temperatures along the eastern seaboard but above normal conditions over three-fourths of the lower 48. The 8-14-day has above normal temperatures across the entire nation. The Biden administration released a long-awaited study on the economic and environmental impacts of liquefied natural gas exports on Tuesday, saying the results underscored the need for a cautious approach to new permits. Biden in January had paused the Department of Energy’s approvals of US LNG exports to big consumers in Asia and Europe in order for his administration to conduct the review, triggering complaints from the oil and gas industry. The report is expected to be ignored by the incoming Trump administration. Industry representative reiterate that increased global consumption of natural gas lowers coal usage, which is beneficial for the environment. S&P Global Inc released a study highlighting the significant economic impact of the LNG exports, saying it will support nearly 500,000 domestic jobs annually and contribute $1.3 trillion to the U.S. GDP through 2040, with minimal impact on domestic gas prices. The Reuters poll for this week’s EIA gas storage report calls for a draw of 115 to 129 bcf.
PRODUCT MARKETS
The products took back some of yesterday’s losses overnight as traders stepped back ahead of today’s FOMC results. API stocks were mostly neutral relative to expectations. The EIA report this morning could carry more weight, but unless there is a big surprise, the reaction may be limited until after FOMC.
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