Written Commentary
CRUDE OIL
Crude oil prices remain on-track for a second negative weekly in a row, but they have able to regain upside momentum in the face of some bearish supply news. If improving global risk sentiment can soothe fears of demand destruction, the market could finish this week on an upbeat note. October crude oil fell to its lowest level since February on Thursday, but it reversed course to close higher on the day, and it was higher again overnight. Despite threats from Putin, euro zone nations are planning to implement price caps on Russian energy imports. This has ramped up supply anxiety for Europe and underpinned crude oil prices. The weekly EIA report featured a larger than expected increase in US crude oil stocks last week, despite of another large draw from the SPR.
RBOB and ULSD are posting moderate gains this morning, but ULSD is the weakest member of the complex for a change. This follows a heavy loss Thursday. RBOB has rebounded from a 7-month low to post a moderate gain. The EIA report showed the US refinery operating rate at 90.9%, down from 92.7% the previous week, 81.9% a year ago, and a 5-year average of 84.8%. Implied gasoline demand came in at 8.727 million barrels per day last week, up from 8.591 million the previous week. However, this also meant that in 9 of 15 weeks this summer, demand was below 9 mbd. Average demand for the past four weeks is down 7.9% from last year. Gasoline stocks rose 333,000 barrels last week, but they were 5.191 million barrels below a year ago and 12.189 million below the five-year average.
NATURAL GAS
Natural gas prices have had a rough start to the month, but they may have finally found their footing. October natural gas held within a tight range on Thursday and closed with a moderate gain, and it was higher again overnight. European gas prices are well below their August highs, but Russia’s threats to cut off exports continue to lend support to the market. The weekly EIA storage report showed a net injection of 54 bcf into US storage last week, which was in line with expectations. This left total storage at 2,694 bcf, 11.5% below the 5-year average. Over the last four weeks, storage has increased 193 bcf. Power plant demand is expected to fall off the next couple of weeks, and US production is expected to climb above 99 bcf per day to a new record high.
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