Written Commentary
NATURAL GAS
While the November gas contract aggressively rejected the latest lower low move yesterday, the pattern of lower highs was not reversed. In a bullish longer-term development, LNG exports from the damaged export terminal in Texas are forecasted to expand ahead. At present Freeport LNG is supposedly processing an average of 1.9 bcfd of gas and a return to full operating capacity would require processing roughly 2.1 bcfd of gas into LNG.
CRUDE OIL
With the petroleum complex posting downside breakout extensions early today fears of surging US interest rates and unending strengthening of the dollar are likely prompting profit-taking from commercials, funds, and speculators. Apparently, the rollover of production restraint from the OPEC meeting, a much larger than expected decline in API crude oil stocks of 4.2 million barrels yesterday and a 9.2% week over week decline in European crude oil storage the markets have failed to find support this morning. Predictions of much larger than normal US refinery fall maintenance programs should begin to reduce the US refiner calls on cash crude supply. In fact, with US refinery margins falling to the lowest level in 19 months many refiners are financially compelled to perform maintenance. Internationally, precipitous declines in nondollar currencies and the highest seaborne crude oil export reading in three months certainly justifies this morning’s weakness.
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