Written Commentary
by market analysts Stephen Platt and Mike McElroy
Price Overview
A continuation of Friday’s reversal saw the petroleum complex register strong gains today, with the December crude contract expiring at 77.60 while the January saw a gain of 1.79 to settle at 77.83. The strength pushed crude and heating oil firmly above their 200-day moving averages while the gasoline tested there but could not break through.
The OPEC+ meeting on November 26th has become the main topic of discussion, with trade appearing to believe that the producer group will increase output cuts to battle recent poor price performance. The strength has also flushed out profit taking ahead of the Thanksgiving holiday. Tensions in Gaza have ramped up with increased fighting despite talks progressing toward a prisoner release and temporary cease fire, which helped support the market.
Resistance at the 200-day moving average did not hold up for long, as prices quickly tested the 78.50 area, which is a 38 percent retracement of the break since mid-October. If that level can be taken out, he 80-81 range is the next target. A retrenchment in prices will not find much support until the 9-day moving average near 76.50.
Wednesday’s weekly storage report is pointing to a build in crude oil stocks of 1.5 mb, while gasoline stocks are expected higher by .4 and distillates lower by .6 mb. Refinery utilization is estimated to have increased .8 to 86.9 percent.
Natural Gas
The week kicked off with downside follow-through as the December contract made an intraday low at 2.864 before closing with a 7.8 cent loss at 2.882. A production jump over the weekend set the tone early, with output exceeding 108 bcf/d. Weather models also trended warmer and added to the negative bias. In the background was a report from the NOAA predicting moderate to strong El Nino conditions this winter that would typically translate to above nomal temperatures for the Northern half of the US. The 2.80 area is the downside target for the December contract before its expiration next Tuesday, November 28th. As activity moves to the January natural gas, the equivalent target is 3 dollars, which likely offers considerable support with plenty of winter left to throw a curve at the market and necessitate the return of risk premium. A recovery will find minor resitance near 3.24 and then at the 9-day moving average currently at 3.28.
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