Written Commentary
CRUDE OIL
Crude oil prices maintained upside momentum through the holiday break as they finished Thursday with a sizable gain, and they have held within an inside-day range above their 200-day moving average early today. Saudi Arabia will increase their crude prices for February delivery to Asian customers, a mildly positive indicator for Pacific Rim demand that underpinned crude oil prices. The EIA said that US crude stocks had a weekly decline of 1.178 million barrels, less than half the decline the market expected. Crude stocks are 15.464 million barrels below year-ago levels and 23.413 million barrels below the five-year average. Crude oil stocks at the Cushing, Oklahoma hub fell by 142,000 barrels and are just 2.54 million above what the industry considers an operational low of 20 million barrels. Cushing stocks are also at their lowest level for the last week of December in 17 years. US crude oil production was 13.573 million bpd, a third decline in a row, but it remains just 58,000 bpd below the record high from early December.
NATURAL GAS
Natural gas prices were able to shake off early pressure and climb into positive territory as they finished Thursday with a mild gain, but they have turned back to the downside and are close to filling in Monday’s chart-gap early in today’s eventful session. Cold weather across the eastern US next week should boost residential heating and power plant demand for natural gas over that timeframe, and that continues to underpin natural gas prices after this week’s severe volatility. LSEG projected US LNG exports last month at 8.5 million tonnes, 4.5% above last year, 9% above November and close to a record monthly high. LSEG also estimated 2024 US LNG exports at 88.3 million tonnes, a 4.5% increase over the 2023 total, which provided additional support to the market. The Reuters survey has a median forecast for US gas storage to have a weekly net decline of 124 bcf, which compares to a 93 bcf draw last week, a 35 bcf decline the previous year, and a 5-year average draw of 104 bcf.
PRODUCT MARKETS
Both product markets extended their recovery into the new trading year. However, sizable gains so far this week have led to a wave of profit-taking early in today’s action. The Chinese government increased retail prices for gasoline and diesel, which will deflate market concern over lukewarm Chinese energy demand. The EIA report showed the US refinery operating rate at 92.7%, up 0.2% from last week compared to 93.5% last year and the five-year average of 87.3%. Implied gasoline demand and implied distillate demand both had large weekly declines that weighed on prices. However, the average total product demand for the past four weeks was down just 1.20% compared to last year. EIA distillate stocks rose 6.406 million barrels, a much more significant weekly increase than expected. Still, distillate stocks are 2.988 million barrels below last year and 7.696 million below the five-year average.
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