Written Commentary
CRUDE OIL
December Crude Oil is trading inside the range of the past two sessions this morning as the market awaits today’s weekly EIA report on US petroleum supply. The trade is looking for an increase of 1.8 million barrels in US crude oil stocks, with gasoline stocks expected to be down 2.2 million and distillates down 1.5 million. Refinery runs are expected to be down 0.6% to 86.1%. The API report yesterday showed a 1.58 million barrel decline in crude stocks, with gasoline stocks down 5.93 million and distillates down 2.67 million, which was bullish against expectations, but the API and EIA results have often conflicted. Traders also awaiting developments in the Mideast after the market was pressured earlier this week by reports that representatives of Israel’s government had said they would not target Iran’s oil or nuclear infrastructure when they retaliate for Iran’s retaliation. The trade is also waiting on more details from Beijing on how they plan to support China’s economy. Asian shares were down overnight after a briefing on housing policy underwhelmed investors. Saudi Arabia’s crude exports fell to 5.671 million barrels per day in August, down from 2.741 mbpd in July and their lowest in a year. Production was 8.992 mbpd. Traders are also waiting to see if ECB will lower rates for the second straight time, which would be the first time in 13 years.
NATURAL GAS
January Natural Gas is slightly higher this morning after falling to its lowest level in more than three years yesterday. A warm-up forecast for most of the US over the next couple of weeks is expected to lower heating demand. LSEG says there were 60 total degree days last week versus an average of 68 for the period. This comes on top of a lower demand profile in the wake of power outages from the recent hurricanes. For the inventory report this morning, the Reuters poll has an average expectation of +77 bcf (range +63 to +87). The five year average for this week is +88 bcf. Last week’s report showed was +82 bcf versus +84 bcf for the same week last year. Increases have been behind year ago levels for the past several week, which has allowed the surplus to year ago and five-year average levels to narrow. Last week was the first time in seven that the increase came even close to year-ago levels. If today’s storage report comes in at expectations, it would put total current levels at 2.2% above a year ago and 5.5% above the five-year average versus +2.8% and +4.9% last week.
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