Written Commentary
Price Overview
The petroleum complex traded mixed with crude and gasoline showing small losses while ULSD was the weakest within the complex. Discussions between Russia and Saudi Arabia were reported ahead of the meeting by the OPEC Joint Market Monitoring Committee today. The meeting opened discussions on the potential for demand as COVID-19 infections rise in Europe and governments tighten lock downs in many areas. Economic news from China was supportive with third quarter growth indicated at 4.9 percent year over year. Although it fell short of the forecast at 5.2, continued growth in retail sales of 3.3 percent year over year along with an increase in industrial production from last year of 6.9 percent helped uncover modest buying interest. Ideas that large stimulus actions will remains one of the few bright spots for global growth. Despite the impressive economic statistics for China, some retrenchment in crude imports from near record levels registered in July and August is expected as higher prices, high stock levels of products and poor margins limit crude throughput.
Natural Gas
Prices ended the session near unchanged levels after trading sharply lower overnight. The weakness stemmed from news late in the day on Friday suggesting that the clearing of the Calcasieu shipping channel, which is the access point for vessels into Cameron LNG facilities, could take 3-4 weeks. The news heightened concerns about topped off storage levels as November traded over 10 cents lower and the December lost 3-4 cents after official settlements had been posted. The weakness followed through overnight as production remained firm this weekend above 88 bcf/d and recent forecast flip-flopping continued with a decrease in HDD expectations. The market managed to recover the losses as the day progressed, as LNG flows upticked to 7.5 bcf/d from 7.3 over the weekend and Cameron increased intake despite the shipping issues. With no tropical disturbances in view, the market may have drafted some underlying support from ideas that we may finally be done with the hurricane season and processing facilities can get back on track as we head into the winter demand period. We continue to look for prices to work higher, but current LNG issues could portend some near term weakness. Weather demand will need to be watched closely as any significant rally will likely need the assistance of normal to above normal HDD demand to be realized. Support in December at 3.20 held up today and could be tested again near term, with initial resistance in the 3.30-3.31 area.
Charts Courtesy of DTN Prophet X, EIA, Reuters
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