Written Commentary
NATURAL GAS
We remain bearish toward natural gas following reports yesterday that China were “reselling” gas to the market and from overnight reports that Chinese and Japanese storage levels continue to build. However, part of the bearish Chinese stockpile news is offset following an increase in Chinese October power production of 5.2% versus last October. With the natural gas market posting a five-day high yesterday and then plummeting to close nearly $0.16 below the day’s high, the recovery bounce has clearly ended. Unfortunately for the bull camp, the US LNG export facility run by Freeport that closed several days ago has returned to service. In fact, with yet another record US production reading and the natural gas market fresh off a noted bounce, we see the reversal yesterday extending on the downside bias today.
CRUDE OIL
Apparently, the bullish windfall from a dramatic improvement in global economic sentiment was short-lived in the petroleum markets. Apparently, improved energy demand views are largely offset by rising concern of a rebuilding of global crude oil inventories. In fact, China posted in October crude oil output gain of 0.5% over last year and a January through October crude oil output gain of 1.7%. Fortunately for the bull camp, Chinese production gains were very modest, and the January through October crude oil refinery runs were up a very sharp 11.2% on the year. However, those run rates were down from the prior month and Chinese refiners are projected to cut refinery runs ahead in response to soft demand. Yesterday the API reported a crude oil stocks increase of 1.34 million barrels per day compared to the Reuters EIA crude oil inventory forecast of 1.8-million-barrel gain later today.
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