Written Commentary
CRUDE OIL
January Crude Oil is close to unchanged this morning towards the center of yesterday’s range. The ceasefire between Israel and Hezbollah went into effect today after both sides accepted an agreement brokered by the US and France. Netanyahu said he was ready to implement the ceasefire but that they would respond forcefully to any violation by Hezbollah. OPEC+ nations are meeting on Monday, and there have been several report that they will delay their a planned lifting of quotas again due to low prices. The planned hike, when it actually comes, is due to be about 180,000 barrels per day. So far it appears that the Trump administration’s plans to impose 25% tariffs on Canadian and Mexican imports would include crude oil, but keep in mind that Trump often takes an aggressive posture at the beginning of negotiations. The API report last night came in bullish for crude oil and bearish for the products. US crude stocks fell 5.94 million barrels last week versus expectations for a decline of 600,000. The EIA report will be released this morning. Refinery runs are expected to be down 0.4% of capacity to 89.8%.
PRODUCT MARKETS
The API report yesterday showed US gasoline stocks were up 1.81 million last week versus -50,000 expected, and distillates were +2.54 million versus +100,000 expected. This could have reflected a buildup ahead of the heavy travel period.
NATURAL GAS
January Natural Gas was sharply lower overnight, as the market was apparently disappointed that it failed to build on last Friday’s move above the 200-day moving average this week and also failed to move above the October high. The arrival of seasonably cold weather had allowed the market to build off its contract lows from earlier this month, but it also put it in an overbought condition. The recent cold weather trend is expected to moderate over the next two weeks. The 8-14 day forecast shows temperatures moderating in the east, with warmer than normal conditions covering the western half of the lower 48 states. Russian state gas producer Gazprom is making the assumption that no more gas will flow to Europe after December 31. Kyiv has said it wants to end the transit deal, but the flowage generates up to $1 billion per year in transit fees for Ukraine. Europe is now more dependent on US LNG supplies. The EIA storage report will be released at 11:00 today because of Thanksgiving tomorrow. Reuters poll has expectations ranging from a draw of 11 bcf to an injection of 6 for the week ending November 22.
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