Written Commentary
CRUDE OIL
November Crude Oil traded to its highest level since August 13 overnight higher overnight on news that Hezbollah rockets had hit Israel’s third largest city, Haifa, thus feeding concerns that the escalation of hostilities in the Middle East would at some point affect supply. So far that has not happened, but there are concerns that Israel could target Iranian oil infrastructure. Iran is a member of OPEC+ with production around 3.2 million barrels per day or 3% of global output. However, that the group is believed to have enough spare capacity offset a disruption in Iranian supplies. Libya’s national oil company said last week that all of its oil fields and export terminals were being reopened after a dispute over the leadership of the nation’s central bank was resolved. The Baker Hughes oil rig count was down 5 rigs last week to 479. The followed a decline of 4 rigs the previous week. Rigs are down from 497 a year ago and below the five-year average of 486.2. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 20,688 contracts of crude oil for the week ending October 1, reducing their net long to 141,240.
PRODUCT MARKETS
Both RBOB and ULSD followed crude oil higher overnight. Friday’s Commitments of Traders Report showed managed money traders were net buyers of 1,883 contracts of RBOB for the week ending October 1, increasing their net long to 25,762.The EIA said on Friday that US diesel consumption is expected to increase in the next few weeks as harvest picks up. There were reports that agricultural co-ops had been active buyers of ULSD in the Chicago area spot market in recent weeks in preparation. Over the last five years, distillate fuel oil consumption has increased by an average of 4% between September and October.
NATURAL GAS
November Natural Gas had a key reversal lower on Friday, and it has extended that selloff this morning. The weekly Baker Hughes rig count on Friday showed US natural gas rigs in operation were up 3 rigs to 102 last week, which is the highest they have been since July 19. This was also the second straight week with an increase. Rigs are still down from 118 rigs a year ago and below the five-year average of 118.6. EIA storage injections during July-September were at record lows for that time of year going back to at least 1997, which has helped narrow the surplus to year ago and five-year average levels. However, the two straight weeks of increases in the rig counts may have traders thinking this trend will end. Tropical Storm Milton is expected to strengthen into a Hurricane this week as it proceeds across the Gulf and heads towards Florida. At this point it does not look like LNG loading facilities will be affected. The NWS 6-10 and 8-14 day forecast still show above normal temperatures across most of the US, which could support some late season cooling demand. However, it also reduced heating demand in the northern parts of the country. Friday’s Commitments of Traders Report showed managed money traders were net buyers of 1,087 contracts of natural gas for the week ending October 1, reducing their net short to 13,713.
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