Written Commentary
CRUDE OIL
Crude oil has been pressured recently by lukewarm to sluggish economic data that have raised concerns about demand. However, the market has move higher in the wake of a bullish EIA report yesterday, and this could continue to support the market over the rest of the week. The report showed a much larger than expected decline in US crude oil stocks last week, due in part from a decline in US crude oil production to 12.1 million barrels per day. The draw from the SPR was 3.402 million barrels, which was the smallest weekly draw since April.
Both product markets shook off early pressure yesterday to finish with strong gains, and they have followed with additional gain overnight. ULSD reached a 2 1/2 week high, but RBOB has regained the upper hand this morning after the yesterday’s EIA report yesterday showed a second large decline in gasoline stocks in a row, pulling them to their lowest level since last November. Implied gasoline demand saw a moderate increase to post its second highest reading of the year so far and a second week in a row above 9 million barrels per day. Implied distillate demand also showed a moderate increase, posting its highest reading since early July.
NATURAL GAS
The natural gas market has benefited from record high prices for LNG in Europe and Asia, but a shift in the US demand outlook could weigh on prices in front of the weekly EIA storage report today. October natural gas reached a new contract high yesterday but fell back into negative territory to finished with a moderate loss and a negative key reversal. The market saw little downside follow-through overnight and is finding mild strength this morning. Very warm conditions in California and Texas this week are lending support, but the 6-10 and 8-14-ay forecasts show a large section of the central US with normal to below normal temperatures, which could lower air conditioning and power plant demand.
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