Written Commentary
CRUDE OIL
October Crude Oil is moderately higher this morning after falling to its lowest level since December overnight. The market sold off hard yesterday on reports of a deal that could allow a restart of Libyan production with Libya’s legislative bodies agreeing to appoint a new central bank governor within 30-days after UN-sponsored talks. Libyan oil exports were halted on Monday, and production was at a standstill, and it remains to be seen when they will resume. The market was also undercut yesterday by sluggish economic growth data out of China, which is a recurring theme. OPEC oil output in August is estimated at 26.36 million bpd, down 340,000 from July and the lowest since January, but Citi Research said overnight that unless OPEC+ lowers production further, 2025 prices could average $60 per barrel. OPEC+ is scheduled to ease quotas next month (raise production), but it has stated that the plan is subject to change. For the weekly US inventory reports, a Reuters survey has traders looking for US crude stocks to be down 600,000 barrels last week, with gasoline down 800,000 and distillates up 400,000. Refinery runs are expected to drop 0.4% to 92.9%. The EIA report is delayed until Thursday because of Labor Day.
PRODUCT MARKETS
October RBOB followed crude oil lower overnight to trade to its lowest level in over a year, and its recovery bounce off those levels have been even less impressive than crude’s. The nearby chart has RBOB at its lowest level in almost three years.
NATURAL GAS
October Natural Gas extended yesterday’s rally to trade to its highest level since August 21 overnight. We may be approaching the shoulder season, when heating and cooling demand are at their lowest and domestic supply build, but supply/demand fundamentals seem to be recovering. For the EIA storage report this week, a Reuters survey shows traders looking for US gas storage to be up anywhere from 20 to 33 bcf last week. US supply is running at a surplus to year ago and the five year average, but the surplus to a year ago has narrowed from 23% last March to 7% last week. The surplus to the five-year average was 41% last March and was 12% last week. US LNG exports increased to 7.48 million metric tons in August from 6.69 million in July. July was the second-lowest of the year. At times in August, Freeport LNG was above its official capacity as it began to benefit from its debottlenecking work following an outage in July.
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