Written Commentary
Price Overview
The petroleum complex traded higher with gasoline and diesel showing the strongest gains. The tight stock level in gasoline and shift in refinery throughput to favor the production of gasoline helped underpin product markets. Underlying support to the complex was also provided by the strength to equities along with the weaker dollar. Macro economic news otherwise was generally ignored with concerns over the recent rise in virus cases and potential for a second surge creating some caution over demand prospects. Some support to crude was also apparent on the prospect of a Norwegian Oil workers strike on Sept 30. However, the potential for increasing availability from Libya and also from Iran appeared to dull buying interest amidst concern over demand prospects.
Natural Gas
The market traded under pressure into the expiration of the October contract. Weakness was traced to forecasts for moderate temperatures into early December and that despite ideas that the supply surplus will be contracting the possibility of a stock level near 4.1 tcf at end November helped limit fresh buying interest as the storm premium is taken out of the market. 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 ability to recover from today’s low near 2.70 and back above support near 2.77 basis Nov might be a sign that a stabler tone might evolve in the near term as the market assesses prospective production trends and LNG export demand as we move toward winter. How the market trades into the EIA report this week, whereby forecasts for a large build of 85 bcf are circulating, might be a key a key indicator of the market’s ability to hold and possibly improve on current valuations.
Charts Courtesy of DTN Prophet X, EIA, Reuters.
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