Written Commentary
CRUDE OIL MARKET
The bullish drumbeat is unrelenting with October crude oil forging a new high for the move and the highest trade since August 15th. In addition to a rekindling of positive demand from lower US rate hike fears, the bull camp is definitively cheered by a massive decline in API crude oil stocks yesterday afternoon of 11.4 million barrels. Perhaps buyers are being prompted to chase prices higher with buy orders because of predictions from Citigroup that OPEC may have to consider further production cuts. Apparently, the trade discounts are the reason for the need for further OPEC production cuts from supply overcoming softening demand. However, at present the prospect of rebuilding supply shows no sign of materializing. In fact, overnight crude storage in ARA facilities declined by 1.2% over the prior week and a coup in Gabon highlights a pattern of political uncertainty in some African oil-producing countries. In a negative development hurricane Idalia has passed through production areas without significant impact.
PRODUCT MARKETS
Both product markets remain on the defensive after Tuesday’s downdraft as they finished Wednesday in negative territory and are trading sloppy this morning. The Marathon Garyville, Louisiana refinery (with the third largest capacity in the US) came back online Tuesday, which should ease concern over tight East Coast supplies and that pressured both product markets early this week. Idalia has lost strength and is headed in an easterly direction and that will take it southeast of the Colonial and Plantation pipelines, which reduces the chances for shutdowns and bottlenecks. However, a hurricane traveling through north Florida, southeast Georgia and the Carolina coast will disrupt travel plans and reduce fuel demand throughout the region during a holiday.
NATURAL GAS
The inability to hold onto sizable gains on Monday continues to weigh on natural gas sentiment as the market held within a tight range before finishing Tuesday with a modest loss. Hurricane Idalia tracked well east of Gulf Coast gas infrastructure and probably caused only limited disruption to LNG exports. In addition, the storm will bring cooler temperatures and less usage to a region of the US that normally has strong demand at this time of the year. In contrast, the last 6-to-10-day forecast has above-normal temperatures from the Plains to the Atlantic Coast, and that should give a badly needed boost to power plant demand for natural gas.
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