Written Commentary
NATURAL GAS
With Tropical Storm Fiona likely to track away from US oil/gas production areas, evidence of steadily building Norwegian gas storage and further evidence of European efforts to reduce demand this winter, the range down early move is justified. In fact, tropical storm Fiona tracking has the storm remaining to the east of Bermuda and other potential systems from earlier in the week have failed to organize. On the other hand, much hotter than normal temperatures are forecast to continue in the West and southern US out to the end of the month. The weekly natural gas storage report showed an injection of 77 bcf. Total storage stands at 2,771 bcf, or 11.3% below the 5-year average. Over the last four weeks, natural gas storage has increased 252 bcf. The EIA storage report was bearish with the injection above the top of the Reuters survey and the deficit to the 5-year average narrowed slightly.
CRUDE OIL
Despite favorable Chinese industrial production and retail sales readings for August released overnight, the energy trade continues to embrace softening Chinese energy demand. While a slight decline in Chinese August crude oil production of 0.2% offers minimal support, a wave of energy data from the Chinese statistical Bureau clearly favors the bear camp. The Chinese statistical Bureau pegged January/August oil output up 3.2% over last year, January/August crude oil runs down 6.3%, and August crude oil refinery throughput down 6.5%. Obviously, constant global recession forecasts, the reversal of buying off the rail strike threat, and Department of Energy statements denying there is a “trigger price” to begin rebuilding the SPR adds to other pre-existing bearish fundamentals. With this week’s EIA crude oil inventory showing a second weekly build (+11 million barrels in 2-weeks) and the year over year inventory surplus growing to 12.1 million barrels, supply inside the US is set to weigh on prices.
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