Written Commentary
CRUDE OIL
November Crude Oil was higher overnight but stayed inside yesterday’s range. The market backed off its highs yesterday after seeing a sharp rally the previous day in the wake of Iran’s missile strike against Israel. There are concerns that Israel might target Iranian oil infrastructure in retaliation. However, the market is also aware that there may be enough spare capacity in OPEC to make up for losses in Iranian crude oil output. Iran’s exports reached 1.7 million barrels per day this year, but Saudi Arabia is estimated to be able to increase production by 3 mbpd and UAE another 1.7 million. However, that spare capacity could also be threatened by a widening in the scope of the war. Israeli Prime Minister Netanyahu said that Iran would pay for its missile attack on Israel, and Iran said that any retaliation would be met with “vast destruction.” Some have speculated that oil prices could back off if Israel proceeds ahead against Hezbollah and puts aside direct retaliation against Iran. OPEC+ is still planning to lift export quotas in December. Asian demand remains a concerns. Their crude oil imports for the first three quarters of 2024 averaged 26.7 mbpd versus 26.9 for the same period last year. The EIA Report came in bearish yesterday, with crude and gasoline stocks increasing last week versus expected declines. Distillate stocks fell a little less than expected. Refinery operations fell sharply, perhaps because of slowdowns ahead of Hurricane Helene, but a sharp drop is not unusual for this time of year. Crude and the products sold off in the wake of the report.
PRODUCT MARKETS
November RBOB is higher this morning and is pushing up against the 50-day moving average at 2.035.
NATURAL GAS
The natural gas market has been on an uptrend since putting in a low on September 3, as US gas storage builds have been lower than normal for several weeks, allowing the surplus supply to narrow. LSEG said this week that gas output in the lower 48 fell to an average of 101.8 billion cubic feet per day in September, down from 103.0 bcfd in August and the record 105.5 bcfd in December. A mixture of above normal and below normal temperatures across the US keep are keeping cooling degree day expectations elevated but heating degree days down. Expectations for the US gas storage report this week call for build of 60-65 bcf. The five year average build for this week is 87 bcf.
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