Written Commentary
CRUDE OIL
The petroleum markets are having a volatile finish to November, with crude oil having a daily range of less than $3 in only one session of the past 13. With several factors moving market sentiment, crude oil prices are likely to have a bumpy ride today and tomorrow. January crude oil fell to a 10-month low on Monday but bounced off that level and finished with a mild gain, and it has followed that with strong gains overnight. Concerns over Chinese energy demand ware worsened by protests over Covid restrictions in China over the weekend, but a positive vibe from early Black Friday and Cyber Monday sales figures improved risk sentiment and the domestic energy demand outlook. A New-York based risk consultancy group said that OPEC Plus nations are considering an output cut at next week’s meeting. There has been no official confirmation, but this report gained traction and helped fuel short covering. The EU failed to agree on a price cap for Russian seaborne crude oil. If they do not reach an agreement by Monday, all Russian crude imports into the EU will be banned. The Reuters survey had a median forecast for US crude oil stock to show a decrease of 2.5 million barrels last week. If this is matched by the EIA report, it would put US stocks at a seven-week low.
NATURAL GAS
A late rebound in natural gas on Monday could be an indicator that the market has put in a near-term low. The date for the reopening of the Freeport LNG export terminal remains up in the air, which continues to pressure prices, while US gas production is holding consistently above the 100 bcf per day level. Demand will also by suppressed by the mild temperatures expected across much of the US this week. However, the 8-14-day forecast calls for below normal temperatures across the upper Midwest, the Plains, the Rockies, and the Pacific Coast, which should help strengthen demand next week. There is also a potential US rail strike later this month, which could shut down deliveries of coal to power plants and force utilities to run their natural gas plants at full steam. With the shift towards colder weather expected for mid-December, if the chances for a US rail strike increase, natural gas could retest last week’s spike highs. Look for support in January natural gas at $7.160, with resistance at $7.380.
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