Written Commentary
CRUDE OIL
November Crude oil extended its rally slightly overnight following yesterday’s sharp reversal higher after Iran fired ballistic missiles into Israel. The damage from the strike was limited by Israel’s missile defense systems, but there were a lot more this time than their previous strike in April. The question is how Israel will respond, and some have speculated this could include attacking Iran’s oil facilities. OPEC+ ministers are meeting online today, but no change in policy expected. The group is scheduled ease back quotas, which would result in output increasing by 180,000 barrels per day in December. However, Saudi Arabia’s oil minister warned that prices could drop below $50 per barrel if members do not stick to their quotas. Iraq and Kazakhstan promised cuts of 123,000 bpd in September and more in later months as compensation for previous overproduction. Russia will increase oil exports via its western ports to 2.2 million bpd in October, up slightly from September, as refineries are expect to increase runs only marginally despite coming out of their maintenance periods. The API Report yesterday reported showed crude stocks falling by 1.46 million barrels last week versus -1.3 million expected. Gasoline inventories increased by 437,000 barrels versus an expected decline of 100,000. Distillate stocks fell by 2.67 million barrels versus -1.5 million expected. There wasn’t much reaction, but the EIA report could carry more weight today.
PRODUCT MARKETS
API stocks were bearish against expectations for RBOB and bullish for ULSD, but the EIA report this morning and the action in the Middle East take precedence.
NATURAL GAS
November Natural Gas pushed through another technical resistance level overnight, this time the 200-day moving average. The market has been on an uptrend since putting in a low on September 3, as US gas storage has seen lower than average builds for this time of year. The market fell under pressure yesterday off an expected drop in power needs with more than 1.6 million homes and businesses still without power in the wake of Hurricane Helene, but the market has discounted those concerns. LSEG said gas output in the lower 48 fell to an average of 101.8 billion cubic feet per day in September, down from 103.0 bcfd in August and the record 105.5 bcfd in December. Expectations for the US gas storage report this week call for build of 60-65 bcf. The five year average build for this week is 87 bcf. The NWS 6-10 and 8-14 day forecasts show above normal across the western ¾ of the lower 48, which should support cooling demand but keep heating demand at a minimum.
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