Written Commentary
CRUDE OIL
November Crude Oil is down sharply for the second straight day, and it has given back 67% of its gains off the 16-month low from earlier this month. Reports that Saudi Arabia is preparing to abandon its unofficial price target of $100 per barrel as it prepares to increase output has turned trader attitudes bearish, despite heightened tensions in the Middle East and new stimulus measures announced by China early this week. OPEC+ was scheduled to start lifting quotas this fall, but its implementation was pushed back in reaction to low prices and concerns over Chinese demand. The market was pressured yesterday by reports that Libya’s factions had signed an agreement on the process for appointing a central bank governor, an initial step towards resolving the dispute that has slashed the nation’s oil production and exports. Their exports this month are estimated at around 400,000 barrels per day versus 1.0 million in August. About 29% of US Gulf crude production was shut in ahead of Hurricane Helene, the US Bureau of Safety and Environmental Enforcement said yesterday, but the storm’s shift eastward has reduced the threat significantly. Yesterday’s weekly EIA report came in at the bullish end of expectations, with crude oil, gasoline, and distillate stocks showing bigger declines than expected, but that only provided temporary support. Crude stocks in Cushing, Oklahoma had their first increase since August 2 and only the second since June 28.
PRODUCT MARKETS
November RBOB and ULSD are following crude oil lower this morning as they apparently fear higher Saudi output more than anything at the moment.
NATURAL GAS
November Natural Gas has held below the 100-day moving average for the third straight session overnight, and that continues to be a key bull/bear line. A warming trend across the US could bring higher cooling demand over the next two weeks than previously expected, especially in the western half of the US. Hurricane Helene is expected to make landfall along the Florida Panhandle as a Category 3 or possibly 4 storm around 10 PM tonight. A storm like this is more likely to reduce natural gas demand through power outages. However, the storm looks likely to miss LNG plants, which is better for natural gas consumption. About 17% of Gulf natural gas production was shut in ahead of the storm, but at the most only 25% of total US production comes from that region, which means that only about 4% was affected. US Energy company EQT said it plans to reverse some of its natural gas production curtailments in October and November as demand for the fuel increases. They are the biggest gas producer in the US, and they and other drillers had curtailed output in response to low prices. The seven big US LNG export plants currently operating can turn about 13.8 billion cubic feet per day of gas into LNG for export. This is expected to jump to 17.8 bcfd in 2025, 19.8 in 2026, 22.3 in 2027, and 24.5 in 2028 as new plants already under construction enter service. EQT currently produces 6 bcfd of gas and sends about 25% of that to the Gulf Coast for LNG. For the weekly EIA storage report this morning, the trade is looking for a net injection of 53-57 bcf. The five-year average increase for this week is 87 bcf.
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