Written Commentary
CRUDE OIL
December Crude Oil extended its selloff from Friday’s 9-week high overnight and is back near the low end of a range that extends back to June. The restart of an oil pipeline from Iraqi Kurdistan to a port in Turkey this week and the expectations for OPEC+ to approve another production increase have pushed the Ukrainian oil strikes on Russian infrastructure off the headlines, and the prospect of a US government shutdown adds to demand concerns. Sources told Reuters that the oil tanker Vallesina has been booked to load 700,000 barrels of Iraqi Kurdistan crude oil at Turkey’s Ceyhan port on October 2. This will be the first tanker to load the Kurdistan crude following the resumption of the pipeline flows. OPEC+ is expected to approve another production increase of at least 137,000 barrels per day when they meet this Sunday. OPEC+ production is running about 500,000 bpd under quota, so the threat of a massive increase of oil hitting the global market may have been overestimated.
NATURAL GAS
November Natural Gas extended its recovery rally overnight to trade to its highest level in two weeks. The 6-10 and 8-14 day forecasts call for above normal temperatures to remain in place east of the Rockies out to at least October 13, with normal or below normal temperatures from the western Rockies to the coast. This is a little cooler than yesterday, but it still keeps US heating demand light over the next couple of weeks. LSEG projected average gas demand including exports to fall from 102.4 bcfd this week to 99.7 bcfd next week. On the other hand, LSEG also said average gas output in the lower 48 US states has fallen to 107.5 billion cubic feet per day so far in September, down from a record 108.3 bcfd in August and the average amount of gas flowing to the eight big US LNG export plants for September has been steady with August at roughly 15.8 bcfd versus the record 16.0 bcfd in April.
PRODUCTS
Like crude oil, the product markets are lower this morning on a combination of increased global supply and concerns over US demand if the government shuts down. For the US petroleum stocks reports this week, the early Reuters poll has an average trade expectation calling for gasoline stocks to be +1.5 million barrels for the week ending September 26, with distillate stocks expected to be -2.0 million.
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