Written Commentary
CRUDE OIL
December Crude Oil is sharply lower this morning off a dollar rally in wake of the Donald Trump’s re-election. Trump has proposed high across the board tariffs, which could weaken the Chinese economy and therefore lower crude oil demand. There are also ideas a Trump presidency would increase US production. Keep in mind that current production is 13.5 million barrels per day, which is an all-time high. API data released yesterday showed US crude oil stocks increased by 3.13 million barrels for the week ending November 1 versus an average expectation of +1.1 million. Gasoline stocks fell 928,000 barrels versus -900,000 expected, and distillate stocks fell 852,000 versus -1.1 million expected. EIA report will be released this morning. Refinery operations are expected to be down 0.3% on the week to 88.8%. Russia’s Deputy Prime Minister said today that the nation will stick to its commitments to OPEC+ and hold stick to its quota of 9 million barrels per day. US oil and gas producers have begun shutting-in US Gulf output and pulling workers off platforms ahead of a potential Hurricane moving into the US Gulf and threatening offshore facilities. The US National Hurricane Center warned of steady to rapid intensification of Tropical Storm Rafael to Category 1 hurricane status over the next 24 hours. Producers could lose between 3.1 million and 4.9 million barrels of oil production and 4.56 billion to 6.39 billion cubic feet of natural gas. The projected path of the storm appears to be headed towards Louisiana, with landfall Saturday or Sunday, but that could change. India’s October fuel demand was up 2.9% from a year ago. Gasoline sales were up 8.7% and diesel consumption was up 0.1%.
PRODUCT MARKETS
Like crude oil, the products are weaker this morning off the stronger dollar. API stocks both came in at the bearish end of expectations yesterday, which did not support the bull case to begin with. However, US gasoline stocks are low (even for this time of year) and we are heading into a heavy travel period later this month.
NATURAL GAS
Hurricane Heading to US Gulf; Cooler out West January Natural Gas is one of the few commodities that is higher this morning, perhaps because of the damage done to this market already this week when the market fell to new contract lows. Mild weather this fall has slowed domestic gas consumption and kept US supply at a surplus. The latest forecast has mix of warmer than normal temps east and cooler than normal west. For the EIA storage report tomorrow, a Reuters survey has analysts looking for a build of 38-76 bcc for last week. The average change for this week is +27. Tropical Storm Rafael could become a Category 1 hurricane over the next 24 hours and hit the Louisiana coast this weekend. In theory, this storm could pose a bigger threat to LNG shipping than to US gas production as most of the gas comes from inland if it affects any terminals. The European Union’s likely new energy commissioner, Dan Jorgensen, wants to accelerate the end of the bloc’s dependence on Russia fossil fuels. He wants to acerated use of non-fossil fuels, including nuclear. Some member states have done little to diversify, and Russian gas imports rose last year. Hungary is negotiating to increase flows from Russia. US LNG could help fill the gap. Russia’s Deputy PM said today that Moscow was ready to keep supplying gas to Europe via Ukraine but this should be agreed by Kyiv and the countries involved.
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