Written Commentary
CRUDE OIL
January Crude Oil is back near support around $85 that it has held more or less since early September. The latest statements from President Trump that he is highly unlikely to order fresh attacks on Iran as long as the talks to end the conflict progress counters some expectations prior to the election that suggested he was planning a major assault. Last week there was talk of global supply returning to a surplus condition, with Mideast shipments recovering and demand having fallen due to high prices. JP Morgan estimated a global 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 producers are cutting prices as will, suggesting a return to an extremely volatile market once the Iran war ends. However, shipping costs are high, and producers are having to eat some of the costs. Refining capacity remains limited, which boosts crude supply but keeps gasoline and diesel supplies tight. Shipping and insurance costs are high as well.
PRODUCTS
Product prices were lower early Monday, pressured by lower crude oil. Russia is still facing fuel shortages after Ukrainian strikes on at least eight major oil refineries in the past two weeks, including one on Russia’s second-largest refinery Sunday. Fuel sale restrictions were being introduced at filling stations along highways. Despite the global crude “surplus,” refining capacity is limited.
NATURAL GAS
January Natural Gas was sharply higher early Monday, as a slowdown in US output this month suggests a tightening supply potential. LSEG said average gas output in the US Lower 48 states has fallen to 111.6 billion cubic feet per day (bcfd) so far in November, down from 113.4 bcfd in October. In the meantime, average gas flows to the nine major US LNG export plants are running around 18.8 bcfd, up from 18.4 bcfd in October and on track to tie the record from April. A little more seasonal showing up in the 6-10 day forecast in the northeast and eastern Great Lakes. However, the key gas consumption regions in the Midwest and northern Plains still show above normal temps. The
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