Written Commentary
NATURAL GAS
Surprisingly December Natural gas rallied after the EIA petroleum stocks report and rallied again after the EIA natural gas storage report. The report showed EIA gas storage was up 125 bcf last week to 3,231 bcf versus 3,357 a year ago and a five-year average of 3,452. Clearly the market is in a stock building phase, but stocks are running 3.8% below a year ago and 6.4% below the 5-yr average. Gas storage facilities in Europe were reported to be nearly full, and European gas prices have started to soften. However, a cold snap heading to the eastern half of the US could boost natural gas consumption here and limit stock building in the next couple of weeks. Furthermore, strikes have disrupted power output from French nuclear plants which should provide some spillover demand from cogenerating.
CRUDE OIL
While petroleum prices rallied sharply in the wake of the EIA stocks report on Thursday, the numbers were ostensibly bearish for crude and gasoline. EIA crude oil stocks were up 9.879 million barrels for the week ending October 7. The fact that there was a 7.7-million-barrel release from the SPR mitigated some of the bearishness from the report. At 439.083 million barrels, US crude stocks are up 12.107 million from a year ago and are approaching the 5-year average of 444.772 million. Refinery output was 89.9% vs 91.3 the previous week. With the US claiming that Saudi Arabia strong-armed OPEC+ members into production cuts tensions, between the two countries continue to cool. There was a warning by the IEA that last week’s that OPEC+ decision to cut supply by 2 million barrels per day would lead to a global recession. The IEA downgraded its oil demand growth estimates slightly for this year to 1.9 million barrels per day. December crudes rally in the face of bearish EIA stocks was impressive yesterday, but the market held below Wednesday’s high, keeping the downtrend intact. In today’s action a series of highs this week around $88.52 represent thick resistance with the fear of slumping energy demand likely to control prices without a surprise from Russia.
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