Written Commentary
CRUDE OIL
November Crude Oil extended its selloff overnight, falling to its lowest level since September 11. Israel’s incursion into Lebanon has been less of a concern than the prospect of more supply and slow demand. Libya is preparing to restart oil production that has been shut since late August after reaching an agreement on the new head of the central bank. An engineer at one oilfield said they took advantage of the one-month shutdown to conduct maintenance. Libya’s national oil company announced on August 28 that production had dropped by more than half because of the dispute. They have not provided any estimates since then. OPEC+ ministers meet today, and no policy changes are expected, but you never know given the resumption of the downtrend in prices. They are scheduled to start lifting some of their quotas this quarter. There was a report last week that Saudi Arabia forgoing its official price target in favor of market share, but that was later denied. Yesterday’s PMI numbers out of China showed sluggish economic activity. Early expectations for the US energy stocks reports this week call for a 2.1 million barrel drop in crude oil stocks, a 1.9 million barrel decline in distillate stocks, and a 500,000-barrel decline in gasoline. Refinery runs are expected to be down 0.7% to 90.2%.
PRODUCT MARKETS
Products are under pressure in line with crude oil, but ULSD’s fund position is near reach short level, which leaves that market vulnerable to short covering if resistance levels are violated.
NATURAL GAS
November Natural Gas found resistance at the 200-day moving average yesterday and backed off from there overnight. The price trend is positive, and the seasonal build in US gas supply is running below normal. The once burdensome surplus to year ago levels has steadily decline since June. Early expectations for the US gas storage report this week call for build of 60-65 bcf. The five year average for this week is 87 bcf. US gas rigs in operation are down from a year ago, and more LNG facilities are due to come on line over the next few years, raising the demand potential. The NWS calls 6-10 and 8-14 day forecasts show normal temperatures across eastern Midwest to the Eastern Seaboard and middle and above and much above normal in the west. This could support cooling demand but keep heating demand at a minimum.
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