Written Commentary
NATURAL GAS
A drop in US production this week is putting a bid under the natural gas market for a change and is helping the market avoid a retest of last week’s lows. LSEG said average gas output in the US lower 48 states has fallen to 111.2 billion cubic feet per day (bcfd) so far in November, down from 113.4 bcfd in October. Nonetheless, the weather forecast remains very mild, which will keep US heating demand low for this time of year. The 6-10 and 8-14 day maps show above normal temperatures across almost the entire lower 48 states, with the northern areas showing the biggest deviancy from normal trend.
CRUDE OIL
Crude oil was higher early Thursday but still confined to the lower end of Wednesday’s range. Traders recognize that restoring flows through the Strait of Hormuz is a tall order, but flows via alternative routes be it a pipeline across Saudi Arabia, through Oman to the Arabian Sea, or via Turkey to the Mediterranean, oil is making it out of the region. JP Morgan on Wednesday said the global oil market returned to a surplus of 1.1 million barrels per day in September and 1.4 million bpd in October, nearly matching last year’s average of 1.3 million bpd. Middle East oil exports have recovered to about 20.7 million bpd from 9.8 million in March, still lower than before the war began. Latin American production is +1.5 million bpd and global demand is -3.3 million bpd.
PRODUCTS
Product markets are being led higher by crude oil today, as the markets acknowledge that negotiated peace with Iran will be difficult to achieve. Yesterday’s EIA report was bullish for diesel, with US distillate stocks -3.57 million barrels last week versus -0.1 million expected, and neutral for gasoline, with stocks -0.2 million barrels vs +0.2 million expected. US supplies of both remain very tight.
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