Written Commentary
CRUDE OIL
January Crude Oil is hovering around unchanged this morning but is in the upper portion of Friday’s range. The Baker Hughes rig count last week showed US oil rigs in operation were up 1 at 479 last week. This was down from 500 rigs a year ago and below the five-year average of 499. A lack of new threats of escalation in the Russia/Ukraine conflict over the weekend may have eased concerns a bit. However, Iran has threatened to activate new and advanced centrifuges used in enriching uranium in response to a resolution passed by the UN International Atomic Energy Agency last week ordering them to urgently improve cooperation with the agency. OPEC+ has a meeting planned for December 1, at which the group is expected to postpone planned production increase until February due to low prices. However, Iran’s Oil Minister said over the weekend that the nation will strive to not accept limitations on its oil production quota. Other producers are reportedly anxious to increase production as well. President-elect Trump’s transition team is said to be working on an energy package increase oil drilling off the US coast and on Federal lands, which would boost supply in the long run. However, they also are anxious to rebuild the SPR.
PRODUCT MARKETS
Lower retail gasoline prices and what looks to be a record travel week in the US could support strong gasoline consumption and lower stocks over the next week or two. US gasoline supplies are hovering near six-year lows. Colder weather and seasonal shipping activity could support diesel usage as well.
NATURAL GAS
January Natural Gas is higher this morning but inside Friday’s wide range. The market traded to its highest level since October 4 on Friday but then sold off sharply as traders were clearly disappointed that it did not take out the October 4 high. The market has drawn support recently from cold weather that has moved in after a mild autumn. The 6-10-day outlook has cooler than normal conditions across the eastern two-thirds of the lower 48 states, with much below normal expected in the Midwest and Great Lakes to the Mid-Atlantic. The 8-14-day has warmer than normal weather from the west coast to the plains and the colder weather shifting further eastward. EIA storage levels fell last week for the first time since August, but supply was still running ahead of last year. Record gas offtake for US LNG facilities was achieved last week. The Baker Hughes rig count showed US natural gas rigs in operation were down 2 rigs to 99 last week. This was down from 117 rigs a year ago and below the five-year average of 116. Reports that power demand is soaring for AI and crypto currency also point to strong natural gas usage. President-Elect Trump’s transition team is working on an energy package that would approve export permits for LNG projects that were halted under the Biden administration, which is long-term supportive to natural gas prices.
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