Written Commentary
by market analysts Stephen Platt and Mike McElroy
Price Overview
Crude oil attracted buying interest the last two sessions following the washout at midweek that was based on demand concerns and waning odds that Middle East oil supplies would be disrupted by the Gaza turmoil. The December contract gained 1.43 today to settle at 77.17. Weakness to the Chinese economy remains in the background, although crude import quotas being increased for independent refiners remains a distinct possibility as the government attempts to support overall export levels. Iraq’s oil ministry indicated it was committed to the OPEC+ agreement two weeks ahead of a key meeting of the producer group on November 26th. Production policy for 2024 and the supply/demand outlook will be discussed. Better availability from the Middle East has been noted given the seasonal decline in domestic demand typical in October-November as weather cools. Demand in other areas should begin to recover and absorb some of the decline as refinery utilization rises following seasonal maintenance in developed countries.
For next week, market participants will be watching the delayed DOE report to see whether it validates the sharp increase in inventories of 10.9 mb reported by the API on Tuesday. Stocks remain low and are seasonally drawn down in the months ahead of winter as refinery utilization increases to meet demand for middle distillates. In addition, the monthly reports by OPEC and the IEA will be released on Monday and Tuesday respectively, updating global supply/demand forecasts for the 2024 season. Of particular interest will be the Iranian outlook given recent events in the Middle East. The key to further strength will be Saudi policy and production trends in and outside OPEC. Belief that US production will stabilize in 2024 appears to be softening the reaction to recent forecasts by the US Energy Information Agency that gasoline consumption is likely to decline, however additional strength to the US economy might offset this trend in other products. In December crude, resistance is likely near the 80.00 level and again at the 100-day moving average at 81.00.
Natural Gas
The market tested the 3-dollar level today, reaching an intraday low at 2.989 before ending the session with minor losses at 3.033, marking the fifth straight day of lower closes that started with Monday’s gap down. The selling pressure continues to be attributed to record production levels and mild weather. Some stabilization was seen today as scattered buying was prompted by an expected cooling of temperatures over the weekend through the upper Midwest and East that will at least temporarily boost demand to normal levels. LNG flows today near 15 bcf also offered minor support along with end-of-week profit taking. Until signs emerge of colder temperatures, the 3-dollar level will be revisited to test its resiliency. If it gives out, the 2.80 area would be the next target. On a bounce, minor resistance should surface near 3.12 and 3.20, with the 9-day moving average near 3.30 more difficult to breach.
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