Energy Brief 9.25
Crude attracted modest pressure reflecting renewed weakness in the domestic economy and stalled US stimulus talks, rising fears of a renewed resurgence in coronavirus infections on demand along with the prospect of a likely return of some Libyan exports into the world market. The high initial claims for unemployment in yesterdays report in combination with stalled talks in the US Congress over additional stimulus measures raised fears the recovery might be stalling. If so the impact on demand particularly for transportation and gasoline use which was off as much as 9 percent in the most recent DOE report might be more pronounced particularly as the return of colder weather begins to stymie outside activity in the Northern Hemisphere. With Britain showing record high infections and reinstituting lock downs as a result, fears this pattern might be representative of other areas in Europe will likely limit activity. In India, the news remains also dire, as raging virus infections constrains demand. In August, crude oil throughput in India recorded its largest year on year contraction since April. One bright spot remains China, where economic activity continues to recover toward pre- pandemic levels. An uptick in export activity from Libya has also been noted following the easing of the blockade with crude cargoes being loaded but the threat of a Norwegian oil workers strike on September 30 limited selling interest.
Prices came under pressure as weakness to cash prices undercut buying interest. Forecasts that demand will be limited by the prospect that some switching back to coal will occur following recent strengthening in prices appeared to dull fresh buying interest. Nevertheless, the market was cautious amidst a strong recovery in export levels to Mexico, the return to production of LNG facilities on the Gulf Coast along with recent downward production trends. The amount of gas flowing to LNG export facilities was forecast to reach 6.1 bcf on Friday, up from a two week low of 3.9 bcf earlier this week. Cameron LNG indicated it had begun its restart process this week following the restoration of power. Fresh news regarding the restoration of the Calacaseu ship channel was not available. Although nervousness persists over the recovery in LNG exports, some encouragement might have been garnered by news that oil workers in Norway had recommended a strike action at the end of this month which has the potential to disrupt gas flows to European markets. The lower than expected build in inventories of 66 bcf yesterday appeared to have been overshadowed today by forecasts for a large build in next week’s report of as much as 85 bcf. Key support rests near the 2.77 area basis Nov.
Charts Courtesy of DTN Prophet X, EIA, Reuters.
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