Written Commentary
CRUDE OIL
February Crude Oil is slightly higher this morning but continues to consolidate inside a three-month range. The bearish news regarding Asian demand appears to have eased this week, but so has anxiety over the wars in the Middle East and Ukraine. The Chinese government’s suggestions that it will use monetary policy to induce growth in their economy has offered some support, but this has been limited by their switching to alternative fuels, such as natural gas for trucks and EVs for cars. For the US inventory reports this week, the early Reuters poll has the trade looking for crude stocks to be -2.0 million barrels, with gasoline -2.7 million and distillates -1.1 million. Refinery runs are expected to be -0.4% to 91.4%. These “guesses” are subject to revision as more analysts are polled. EIA stocks will be released on Friday because of the holiday tomorrow.
February Crude Oil remains in a choppy two-sided range.
NATURAL GAS
March Natural Gas extended its recent rally overnight to trade to its highest level since November 26. The market has rallied for six straight days and is closing in on the 200-day moving average at 3.064, which could be a key resistance level. It has not closed above it since October and then only for one day. Warm weather is expected to persist over the lower 48 for the next week, but cooler conditions are expected to emerge, which should boost demand and allow the US supply surplus to diminish. Recall that US storage has seen seasonal but substantial draws over the past two weeks, which has allowed the surplus to fall to 1.3% above a year ago, the narrowest since early 2023. World Weather Service says US temperatures will be well above normal during the coming week, which will minimize heating demand across most of the Great Plains, Midwest and far western states. Some of the temperatures will vary from 20-25 degrees Fahrenheit above normal, with temperatures staying above freezing in many areas during the nighttime hours. However, a sudden turn toward cooler weather is expected during the second week of the forecast, from December 31 to January 6, which should bring in stronger demand for supplemental heating fuel. They added that a strongly negative Arctic Oscillation supports the additional fall in temperatures during the second week of the forecast. For the EIA storage report this week, the Reuters poll calls for a draw of 94 to 100 bcf. This week’s report will be released on Friday.
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