Written Commentary
CRUDE OIL
January Crude Oil extended the recent rally overnight as the Russia/Ukraine continued to heat up. Ukraine fired British cruise missiles into Russia yesterday, and Russia responded by launching intercontinental ballistic missiles into Ukraine today. Energy traders are concerned that Ukraine could target Russian energy infrastructure, as well as being worried how Russia would respond. China’s commerce ministry has announced a series of measures aimed at boosting foreign trade. Low Chinese demand has been a pressure point for crude oil prices this year, and the expected increase in tariffs under the Trump administration threaten to lower China’s economic growth further. China’s crude oil imports are expect to reached 11.4 million barrels per day this month, which would be their highest since August, when they reached 11.56 million bpd. However, given their low throughput readings and weak economic data, some traders think this is more a reaction to low prices than an indicator of strengthening demand. There is also speculation that OPEC+ may push back on production increases when they meet in December, delaying the action again due to low prices. OPEC+ had planned a series of small increases this year and next, but have postponed them because of low prices and disappointing demand from China.
PRODUCT MARKETS
The EIA report yesterday showed a larger than expected increase in gasoline stocks last week and a decline in implied demand, but January RBOB held its own yesterday and rallied overnight to its highest level in almost two weeks. US gasoline stocks are near six-year lows, and we are coming into a heavy travel season (a record 80 million Americans according to AAA). EIA distillate stocks fell slightly more than expected last week. The market was lower yesterday but is back higher this morning.
NATURAL GAS
January Natural Gas prices shot higher overnight, as the recent colder trend in the US has boosted demand expectations. The forecasts show cold weather extending eastward and southward across the lower 48 states, with all but the southeastern US experiencing cooler than normal temps in the 8-14 day outlook. Chicago saw some snow yesterday and could see another 2 inches today. There is also speculation that US LNG exports to Europe could increase in the next few weeks, as US natural gas prices are currently around 80% lower than TFF (Netherlands) prices. US gas flows to were on track to reach a 10-month high yesterday with a record amount seen at the Plaquemines export plant in Louisiana. For the EIA gas storage report today, a Reuters survey of analysts has a range of expectations from -1 billion cubic feet to +14 bcfd for the week ending November 15. The five-year average change for that week is -25 bcf, with a range of -94 to +31.
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