Written Commentary
CRUDE OIL
November Crude Oil took back some of yesterday’s steep losses overnight, supported by a bullish weekly API US supply report as well as shutdowns of oil platforms in the Gulf of Mexico from Hurricane Francine. Reuters reported that the API crude oil stocks fell 2.793 million barrels last week versus expectations for a 800,000-barrel increase. Gasoline stocks were down 513,000 versus an expected decline of 400,000, and distillate stocks were up 191,000 versus an expected increase of 300,000. Recall that last week’s inventory reports showed crude stocks declining around 7 million barrels. The EIA Report will be released later this morning. Hurricane Francine is expected to hit landfall just west of New Orleans this afternoon, and some forecasters are now expecting it to reach Category 2 status. About 24% of US crude oil production in the US Gulf was offline yesterday. The Gulf accounts for about 15% of all US production. Libyan oil exports fell roughly 81% last week, as the National Oil Corporation cancelled cargoes amid a standoff over control of the central bank and oil revenues. Libyan ports shipped 194,000 barrels per day, down from 1 million bpd the previous week.
PRODUCT MARKETS
RBOB prices were higher overnight after the nearby contract fell to its lowest level since November 2021 yesterday. The market may have found some support from a somewhat bullish API report and by the slowdown in US Gulf operations from the hurricane. ULSD prices also bounced off its lows as API stocks grew at a slower than expected rate. The EIA report may have the final word.
NATURAL GAS
November Natural Gas traded in a sideways pattern overnight inside yesterday’s range. About 26% of US natural gas output in the Gulf of Mexico was offline yesterday due to Hurricane Francine, but the Gulf accounts for only about 2% of all US production. The bigger concerns is the potential interruption in US LNG export capability that could cause a backup of US supply. The NWS 6-10 and 8-14 day forecasts showed above and much above normal temperatures for the eastern two-thirds of the nation with below normal temperatures dominating in the west, presenting a mixed demand outlook but perhaps leaning a little bullish for energy consumption. For the US storage report this week, a Reuters survey of analysts calls for increases of 49 to 68 bcf for the week ending September 6. The five year average increase for this week is 67 bcf. US storage levels are ahead of year ago and five-year average levels, but the surpluses have been narrowing since March due to lower US production.
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