Written Commentary
CRUDE OIL
November Crude Oil set back a bit overnight but was still holding in the upper portion yesterday’s move to its highest level in 2 ½ weeks. The market achieved the 0.382 retracement of the selloff from the April highs to this months lows, and yesterday’s high could be a key resistance level today. The market has been supported this week by the Fed rate cut, a decline in the dollar, and escalating tensions in the Middle East in the aftermath of what appears to be Israel’s sabotage of Hezbollah communication devices in pagers in Lebanon. The EIA report this week showed US crude stocks fell more than expected, and stocks in Cushing, Oklahoma saw their biggest single-week decline since January. In a rare bit of bullish news from China, their fuel oil imports increased in August to 1.90 million metric tons (390,000 barrels per day), up 38% from July and 36% from August 2023, according to official customs data. There is some speculation that a looming tax revamp could have spurred refiners to increase supply ahead of the changes. Reuters reported this morning that oil refiners in Asia, Europe and the US are facing a drop in profitability to multi-year lows. Of particular concern is China, whose dragging economy and expansion of EVs and natural gas powered trucks are cutting into crude and product demand.
PRODUCT MARKETS
US gasoline and distillate stocks are above last year but below the five year average. The gasoline market is following crude oil closely, but diesel has been dragging its heels. November RBOB reached its 0.382 retracement of the April-September decline yesterday, and a move through yesterday’s high of 2.0367 would leave the next target at 2.0973.
NATURAL GAS
November Natural Gas is higher this morning after bouncing off a one-week low yesterday. Yesterday’s weekly EIA gas storage report showed supply for the week ending September 13 at 3,445 bcf, +58 bcf from the previous week. This was within trade expectations of +50 to +67 but slightly above the median. It was also the lowest increase for this week in at least five years. Storage was up 5.4% from a year ago and 8.6% above the five-year average versus +5.7% and +9.7% the previous week. Back in June, supply was 13% ahead of a year ago, and in March it was 24% higher, as the excess continues to narrow. Norway’s natural gas production rose to 348.7 million cubic meters per day in August, up from 313.7 million a year ago and 10.8% ahead of the forecast. Norway is a major supplier to Europe, and their higher production eases supply constraints in the wake of the Ukraine war. It could also cut into demand for US LNG.
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