NG Reversal Higher Despite Hurricane Threat

CRUDE OIL

October Crude Oil was lower overnight and was back approaching Friday’s 15-month low. Tropical Storm Francine is expected to reach hurricane strength on today before hitting the Louisiana coast tomorrow. This has led to shutdowns on oil platforms in the US Gulf and the closure of some ports in Texas, but that has only provided mild support to the crude oil market, which continues to be pressured by worries over Chinese demand. The shutdowns are widespread, with Exxon shutting operations at its Hoover offshore platform, Shell pausing drilling operations at two platforms, and Chevron also shutting oil and gas operations at two of its offshore platforms. The US Coast Guard has ordered the closure of all operations at Brownsville, Texas and other small ports in the area. Chinese data on Monday showed consumer inflation accelerated in August to its fastest in six months but that consumer demand remained fragile and producer price deflation worsened. Reuters reported that China’s daily crude oil imports increased to 11.56 million barrels per day in August, their highest since August 2023 but that shipments were a little disappointing at 49.10 million barrels, up from 42.34 million in July but 7% below August 2023. The trade is awaiting the OPEC’s monthly report on production. For the US inventory reports this week, a Reuters survey has an average expectation calling for an 800,000 barrel increase in US crude oil stocks for the week ending September 6, with gasoline stocks expected to be down 400,000 barrels and distillates up 300,000. Refinery runs are expected to fall 0.8% to 92.5%. Recall that US crude stocks showed a surprising decline of 6.9 million barrels last week. At 418.3 million barrels, they are 1.7 million above last year but the second lowest in at least five years.

PRODUCT MARKETS

August RBOB was near unchanged overnight but did manage to avoid Friday’s 3 ½ year low. It may take a surprising decline in gasoline stocks this week to help lift the market clear of its lows. August RBOBV was lower overnight as week but stayed inside yesterday’s range, as it is flirting with Friday’s 2 ½ year lows.

NATURAL GAS

October Natural Gas reversed higher overnight and has an outside day higher going, which is technically supportive to start today. Tropical Storm Francine is expected to strengthen into a hurricane today and hit landfall in Louisiana tomorrow. It is possible that Texas missing the brunt of the storm has eased concerns LNG facilities there will see any impact, but keep in mind that Louisiana is home to three of the US’ seven big LNG export facilities. An interruption in LNG loading operations would be bearish as it could cause a backup of US supply. The amount of natural gas flowing to the Cameron LNG plant in Louisiana has been cut to 1.3 bcfd today from 2.2 bcfd yesterday. The storm could also cut demand from power outages. The threat of lost supply from platform shutdowns less of an issue now that 75% of US production comes from inland formations. For the US storage report this week, a Reuters survey of analysts calls for increases of 49 to 68 bcf for the week ending September 6. The five year average increase for this week is 67 bcf.

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