Written Commentary
CRUDE OIL
Crude oil extended its January rally with sizable early gains and then turned back to the downside following lower-than-expected US factory orders data as it finished Monday with a moderate loss and a daily reversal. After early follow-through to the downside, crude oil has benefited from several supportive developments and is moderately higher this morning. Russia said their December crude production came in at 8.971 million barrels per day (bpd), slightly below their OPEC Plus output quota, and gave crude oil prices an early boost. The Dollar is on track for a third daily decline, supporting many commodity markets. Saudi Aramco raised their crude oil selling price to Asian customers next month by 60 cents a barrel, a higher increase than the market expected and showing improvement with the Asian near-term demand outlook. A Bloomberg survey projected OPEC’s combined crude oil production in December to be 27.050 million bpd, a decline of 120,000 bpd from November’s output. President Biden issued an executive order banning new oil and gas developments along large portions of the US coastline, which will the rate of increase for US crude oil production going forward. There was a news report that President-elect Trump will have a narrower focus on import tariffs than was earlier hinted at. A Reuters survey has a median forecast for US crude oil stocks to have a weekly decline of 300,000 barrels.
NATURAL GAS
Natural gas continues to see coiling price action as it closed Monday with sizable gains, but it has turned back to the downside with moderate losses this morning. A shift towards cooler-than-normal temperatures across large parts of the lower 48 states in the latest 8 to 14-day forecast provided a boost to natural gas prices, which follows reports of frozen gas wells and frozen pipelines in areas of the eastern US, which could reduce nationwide gas production by more than 3 bcf per day. With new LNG export facilities starting operations at Plaquemines, Louisiana, and Corpus Christi, Texas, US feed gas demand for LNG has risen above 15 bcf per day for the first time. President Biden’s executive order banning new offshore gas exploration in many US coastal areas provided additional support as it will keep the growth of US gas production at a mild pace.
PRODUCT MARKETS
RBOB finished Monday with a moderate loss and a reversal as it was overbought coming into this week’s action and found fresh pressure from a lukewarm US factory orders result. In contrast, ULSD closed Monday in positive territory as it benefited from recent cold weather across the US, which boosted heating oil usage. Both product markets regained strength early in today’s action as they have benefited from carryover support from stronger crude oil prices and a pullback in the Dollar. The Reuters survey had median forecasts for US gasoline stocks and US distillate stocks to have weekly increases of 500,000 barrels.
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