Written Commentary
CRUDE OIL
December Crude Oil has an outside day lower going today after opening higher overnight, as the market seems to be focusing on higher supply coming from OPEC+ and uncertain demand. The fact that President Trump decided not to provide Ukraine with Tomahawk missiles after meeting with Ukrainian President Zelenskiy on Friday suggests he is softening his stance against Russia, which lowers the threat of more sanctions. On the other hand, he reiterated on Sunday that Indian Prime Minister Narendra Modi told him India will stop buying Russian oil, while warning that New Delhi would continue paying “massive” tariffs if it did not do so. The Trump administration said last week that there was an agreement, but there was no confirmation from the Indian government. The Baker Hughes rig count showed US oil rigs in operation were unchanged at 418 rigs last week. This was down from 482 rigs a year ago and below the five-year average of 449. This is the lowest they have been for this point in the season since 2020.
NATURAL GAS
December Natural Gas gapped higher this morning and reached its highest level since October 10. News that the European Union’s energy ministers today backed the bloc’s proposals to phase out Russian oil and gas imports by January 2028 bodes well for US LNG exports. The ministers also agreed to phase out Russian gas imports under new contracts starting in 2026 and existing short-term contracts starting in June. The market was oversold after the nearby contract fell to its lowest level since September last week and ripe for a bullish story. The Baker Hughes rig count showed US natural gas rigs in operation were up 1 last week to 121. This was up from 99 a year ago and above the five-year average of 109. This is the highest they have been for this point in the season since 2022.
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