Written Commentary
CRUDE OIL
December Crude Oil is slightly higher this morning following an outside day lower yesterday. The market has been in a choppy sideways pattern this week, as neither the Mideast worries nor the concerns about Chinese demand have been strong enough to push the market in either direction. Apparently the trade is awaiting comments from China’s NPC Standing Committee meeting to see if there are any more announcement about fiscal stimulus. The trade is also waiting for Israel’s response to the October 1 Iranian missile attack, as it has been doing for the past few weeks. US and Israeli officials are set to restart talks for a ceasefire and the release of hostages in Gaza in the coming days. Top executives of two US energy pipeline operators ruled out seeking to build new crude oil pipelines out of the Permian shale field in West Texas because of tepid volume growth. Valero Energy posted an 86% slump in third-quarter profits on Thursday, blaming falling refining margins, but it still beat industry expectations.
PRODUCT MARKETS
Like crude oil, RBOB and ULSD are seeing choppy action with the lack of demand a big driving factor. US gasoline stocks are relatively tight, however.
NATURAL GAS
December Natural Gas is lower this morning following yesterday’s rally to its highest level since October 11. The EIA weekly US gas storage report came in at the bearish end of expectations yesterday, but the market quickly disregarded that news, instead focusing on a slightly cooler forecast for the US and concerns about tighter supplies in Europe. The US 6-10 day forecast shows above normal temperatures across the eastern half of the country but much below normal temps in the west. After that, conditions moderate in both areas but keep the same general pattern of cooler west and warmer east. The benchmark European gas price (Dutch TTF hub) hit its highest intraday level in more than 10 months yesterday on tension over potential supply disruptions due to political tensions in the Middle East and fighting in between Russia and Ukraine. December UK Gas futures were sharply higher again overnight, trading to their highest level since August 20. US acknowledging evidence of 3,000 North Korean troops to Russia for possibly deployment to Ukraine also raises concern about an additional disruption in any remaining Russian pipeline supply.
The EIA Report showed US gas storage for the week ending October 18 at 3,785 bcf, +80 bcf from 3,705 the previous week. This was within trade expectations of +43 to +90 but well above the average expectation of +60. Storage was up 2.3% from a year ago and 4.6% above the five-year average versus +2.2% and +4.5% the previous week. This was the first time since August 23 that the surplus did not narrow from the previous week. LSEG said average gas output in the lower 48 has slipped to 101.5 bcfd so far in October, down from 101.8 in September.
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