Written Commentary
CRUDE OIL
January Crude Oil is lower this morning after trading to its highest level since November 8. The lack of provocative news from the Russia/Ukraine war for the first time this week overnight may have offers a relief from concerns over supply disruptions. The fact that Hamburg Commercial Bank (HCOB) composite euro zone Purchasing Managers Index fell to a 10-month low of 48.1 in November, indicating the European economy is slipping further into recession may have pressure the market as well. Russian Deputy Prime Minister Novak said today that the global oil market is balanced, thanks to actions by OPEC+ countries and compliance with adopted quotas. He also said Russia is preparing to lift its gasoline exports ban. China’s crude oil imports are expected to reach 11.4 million barrels per day in November, the highest since August 2023. Price cuts by Iraq and Saudi Arabia are credited with boosting demand, but some view this as merely stockpiling and does not reflect strong demands. Prior to this month, China’s crude imports had fallen for six straight months.
PRODUCT MARKETS
Product prices are lower this morning in synch with the crude oil market, as a lack of dire headlines from Ukraine eases concerns about supply interruptions and disappointing economic data from Europe raises new questions about global demand. A sharp rally in the dollar also pressures commodity prices in general. We are coming into a heavy travel season (a record 80 million Americans according to AAA), which should support gasoline, diesel and jet fuel usage. A switch to colder than normal weather for most of the US should also support heating oil demand. Look for resistance in January RBOB at 2.0344 and 2.0599, with support at 1.9871 and 1.9367. January ULSD traded to its highest level in two weeks overnight before backing off.
NATURAL GAS
January Natural Gas has reversed lower this morning after trading to its highest level since October 3 overnight and above the 200-day average for the first time since June. At today’s high, the market had rallied 30% from its contract low in just three weeks, and the trade may have grown concerned that it had gone too far, too fast. The weather certainly has turned colder, which should allow seasonal US gas storage withdrawals to commence. The 8-14-day forecast has below normal temperatures stretching across almost the entire lower 48, with the only the bottom half of the Florida peninsula seeing above normal temps. Much below normal temps cover the northern Plains, the Midwest, and as far east as Pennsylvania. The EIA natural gas storage report yesterday was on the bullish, with US gas in storage falling 3 bcf last week versus a range of expectations calling for -1 to +14. The five-year average change for the week is -25 bcf. Storage was up 3.7% from a year ago and 6.5% above the five-year average versus +3.6% and +5.9% the previous week. One of three liquification plants at Freeport LNG’s export plant in Texas tripped offline on Wednesday due to an issue with a lube oil pump, causing an emissions event that lasted more than 11 hours from Wednesday evening until early Thursday. This helped pull prices off their highs yesterday.
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