Written Commentary
CRUDE OIL
Despite news of oil flow from a new Mexican deposit reaching US refineries, expectations that a nuclear deal with Iran might be looming and evidence that Indian oil imports from sanctioned Russia have continued, October crude oil managed a higher high overnight and the highest trade since August 1st.
Confirmation of ongoing Indian purchases of very cheap sanctioned Russian oil might be confirmed by the fact that Indian crude oil imports from the US declined by 1 million tons in the latest quarter. However, overall US crude oil exports from the EIA remained very strong with export volumes down from the prior month, but still within striking distance of the record US export posting. In additional negative supply side news, the markets have detected aggressive OPEC+ efforts to establish long-term sales contracts with various Asian consumers.
From a long-term fundamental perspective, reports that California is likely to approve a ban on gas powered cars by 2035 it is understandable that some longs in RBOB were spooked into liquidating longs. Furthermore, forecasts suggest additional oil embargo sanction implementations will reduce Russian revenue flow from crude oil ahead which in turn will result in the Russians stepping up their exports of diesel and other products. Clearly the diesel market has become the leadership product market, with diesel prices breaking out to the highest level since June 29th and gasoline prices nearly breaking out to the downside.
NATURAL GAS
Despite some US cash gas prices reaching 14-year highs, above normal US temperatures in the 1-to-5-day forecast, a 52-week high in a natural gas ETF yesterday, reports that Chinese 2nd half apparent natural gas demand will increase by 5.5% and another flare in supply fear buying in British and Dutch wholesale markets overnight, futures prices continue to languish in the lower quarter of this week’s trading range. However, natural gas demand expectations are reduced following news that Germany, Spain, Italy, and Switzerland were aggressively working toward reducing their winter gas consumption.
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