Written Commentary
CRUDE OIL
All things considered, the crude oil market performed impressively yesterday in the face of demand threats (from record infections), a strong dollar and in the face of an OPEC+ meeting today where they are expected to raise production. However, OPEC+ has continued to “over comply” with initial production increases over the prior 3 months and therefore the trade is not “afraid of the meeting today”.
With another North American major driving holiday in the rear-view mirror, and the Reuters poll has a median forecast that EIA gasoline stocks will have a weekly increase of 3 million barrels. While the gasoline market is fearful that “stay-at-home” workers will result in softer demand at the beginning of 2022, last week’s implied gasoline demand reading from the EIA reached the highest level (9.72 million barrels per day) since the record posted back in late June and therefore this week’s demand reading will be important for the trade.
NATURAL GAS
The bear camp suggests that natural gas prices were unable to climb up and away from recent consolidation lows, while the bull camp suggests the market has built a strong value zone at the December lows just above $3.50. Unfortunately for the bull camp, temperature forecasts into January 8th call for below normal heating degree days with cold limited to the upper Northeast of the US. On the bull side of the equation an export ban of coal by Indonesia has resulted in coal prices jumping in China and that in turn could shift some electric generating demand to LNG.
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