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Crude Forges Higher High Overnight


Despite a lack of definitive risk on sentiment in the marketplace, crude prices have forged another higher high overnight leaving the charts in favor of the bull camp. Apparently, Bloomberg reports overnight suggest US production is experiencing “bottlenecks” with oil service companies unable to find necessary equipment to find and bring supply to the market. Even though it is difficult to determine how much of this week’s rally is attributable to US Fed relief, big picture economic psychology today will temporarily overshadow OPEC+ efforts to cushion prices. From internal developments the reaction to the OPEC+ production cut of 2 million barrels per day was surprisingly limited, especially with the markets largely anticipating a cut half the ultimate size. However, in a major bullish development the trade thinks Russia could reduce output by 3 million barrels per day if they are presented with a price Cap. The weekly EIA report was supportive of the bull case in almost every major measure. The biggest surprise in the EIA weekly report was a significant jump in the US implied gasoline demand reading which posted the highest reading of 2022. Other major bullish figures from the EIA report were much larger than expected declines in gasoline stocks and the lowest EIA gasoline stocks reading since November 2014!

Oil Refinery


Given the rally in gas prices this week and growing signs of demand destruction in Europe (from slowing activity and aggressive energy conservation efforts) the market is vulnerable to today’s weekly injection report. Furthermore, Bloomberg overnight carried a story projecting that Europe has enough LNG supply already to withstand sustained Russian supply cuts this winter. In our opinion, the bull camp in natural gas will need a return to broad-based macroeconomic optimism today to extend this week’s recovery bounce as today’s weekly EIA gas injection report is likely to post a large triple digit injection. In a fresh supportive development, Denmark yesterday indicated the Russian national gas company had lowered pressure in non-damaged Nord Stream 2 pipelines. The Russian national gas company indicated they have been withdrawing gas supply from some pipelines and redirecting it to St. Petersburg. The US natural gas weather forecast shows a cooler central region and a warmer Northeast and the 6 to 10-day forecast shows warmer in the central and cooler in the West. Therefore, the US temperature outlook favors the bear camp.

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