Written Commentary
CRUDE OIL
The big question for the energy markets in the coming five trading sessions will be where the focus is as outside big picture issues could dramatically impact energy demand views. Obviously the 800-pound gorilla in the markets is the US debt deadline on the 17th with global money markets, US Congressman, the Federal Reserve and even the joint chiefs of staff warning of a major threat to the US. Critical overnight news favors the bear camp in crude oil with predictions Chinese 2024 crude oil imports will only grow marginally, reports Iran is expanding their sales to China (sanctioned supply replaces sales of unsanctioned oil), a poor finish to the week in Chinese equity markets, very negative economic data from the UK and a continued trade below the 200-day moving average. Certainly, the markets were oversold, but the consolidation over the last 36 hours has probably merely mitigated the oversold condition. However, the bear camp maintains the edge with the overall track of supply and demand negative with US oil production at record levels, Russia lifting a ban on fuel exports next week, big oil players rushing to cement deals to pull out oil from Venezuela, and Israel agreeing to daily four hour pauses in fighting to allow for civilians to exit the country.
NATURAL GAS
Another day, another new contract low in gas as the bull camp simply lacks an argument. To summarize, demand remains weak in the shoulder season, inventories are flush, US production remains near record levels and European gas prices remain near a lofty $16.00. European gas storage as of November 8 was 99.6% full compared to five-year seasonal average levels of 90%. Adding to the bear case is an estimated decline in gas flows to US LNG export terminals yesterday. About the only supportive development in the market is the potential the UK will ban Russian gas. The path of least resistance remains down in natural gas despite a significant short-term oversold condition from this week’s gap down opening and subsequent downside extensions.
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