Written Commentary
CRUDE OIL
November Crude Oil was near unchanged overnight after just barely pushing through Thursday’s high. Israel reportedly hit more than 300 Hezbollah targets in Lebanon in two rounds of strikes overnight, which indicates that the war is expanding into a new phase. The market had discounted concerns about supply interruptions, but that could change. Shell said yesterday that it would shut production at two oil facilities in the Gulf of Mexico ahead of a potential tropical depression or tropical storm that could form in the next couple of days. US oil rigs in operation were unchanged at 488 rigs last week. This was down from 507 rigs a year ago but above the five-year average of 486. This is the first time they have been above five-year average levels since last December. The oil market was supported last week by Fed rate cut of 0.5% as well as projections of a another cut of 0.5% by the end of this year and a full 1% worth of cuts next year. There are new concerns about EU economy today, with Euro-zone PMI falling to 48.9 this month from 51.0 in August, raising concerns that economic growth has flattened. The services PMI fell to 50.5 from 52.9. Friday’s Commitments of Traders Report showed managed money traders were net buyers of 28,202 contracts of crude oil for the week ending September 17, increasing their net long to 133,225.
PRODUCT MARKETS
November RBOB is lower this morning as the market retreats from Thursday’s two week high, but that could change if crude oil extends its rally from last week off the Israeli attacks on Lebanon. The Commitments of Traders Report showed managed money traders were net buyers of 3,271 contracts of RBOB for the week ending September 17, increasing their net long to 8,464. This is still near their smallest net long since July 2017. For ULSD, managed money traders were net sellers of 6,827 contracts, increasing their net short to 45,437.
NATURAL GAS
November Natural Gas gapped higher this morning and traded to its highest level since August 15. US natural gas rigs in operation were down 1 rig to 96 last week. This was down from 118 rigs a year ago and below the five-year average of 120. The market saw a strong recovery on Friday following a recovery bounce on Thursday. US gas storage came in above the median expectation last week, but the surplus to year ago levels continues to decline. Fund buying has picked up in recent weeks. Friday’s Commitments of Traders Report showed managed money traders were net buyers of 12,680 contracts of natural gas for the week ending September 17, reducing their net short to 37,964. This is close to a balanced position, and the buying trend is supportive. A potential tropical storm headed into the Gulf of Mexico could interrupt LNG loadings, but forecasts suggest it will make landfall in Florida and miss LNG facilities. Imports of LNG from Russia to the Netherlands’ main terminal port at Rotterdam increased over the past two months. This could be a result of new sanctions that went into effect this summer that prohibit the throughput of Russian LNG from the EU to countries outside of the Union but not the import for usage within the EU. Officials are talking about the need to expand the sanctions, but in the meantime this could compete with US LNG exports to the region.
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