Written Commentary
CRUDE OIL
December Crude Oil was higher overnight but inside Monday’s big range down. The market broke hard Monday on relief that Israel did not attack Iran’s oil infrastructure, and it felt some additional pressure yesterday on reports that Israel PM Netanyahu was to hold a meeting last night with several Israeli ministers and heads of the country’s military and intelligence community about talks for a diplomatic solution to the war in Lebanon. The CEO of Saudi Aramco said the oil market is currently balanced and that demand is expected to average 104.5 million barrels per day this year. OPEC+ is scheduled to raise output by 180,000 barrels per day in December. However, they have postponed the quota liftings at least once already due to low prices. There was a report overnight that China is considering approving the issuance of over 10 trillion yuan ($1.4 trillion) in extra debt in the next few years to revive its economy. A cocoa industry executive commented that they see optimism beginning to return to China with the stimulus policy taking effect. This is similar to comments from a BP executive this week. The API report released late yesterday showed US crude oil stocks fell 573,000 barrels last week versus expectations for a 2.2 million barrel increase. Gasoline stocks were down 282,000 versus expectations for an increase of +500,000, and distillates were down 1.46 million versus -1.4 million expected. The crude oil number was somewhat bullish but the EIA report this morning will carry more weight. Refinery operations are expected to be up 0.2% to 89.7%.
NATURAL GAS
December Natural Gas was near unchanged overnight as it consolidated inside the bottom half of yesterday’s big range down. The 6-10 day forecast calls for a mix of warmer than normal temperatures in the eastern half of the lower 48 and cooler than normal temperatures in the west, with the biggest extreme expected in the southwest. The 8-14-day shows warmer than normal temperatures extending westward, except for the southwest but less extreme in either case. These trends continue to suggest a slow start to the heating season. The cool temps in the southwest could reduce cooling demand as well. For the EIA storage report tomorrow, the Reuters has expectations for increase of 75 to 92 bcf last week. The five year average increase for this week of the year is +78 bcf, with a range of +29 to +107. Last week showed an injection of 80 bcf and was the first time it was above average since July 5 and only the second time since May 3. It appears that slow demand has overcome the lower production trends. As of last week, US supply was 2.3% above a year ago and 4.6% above the five year average. This was the first week since mid-August that the surpluses widened.
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