Written Commentary
CRUDE OIL
January Crude oil is slightly higher today following yesterdays’ sweeping range down off reports of a potential peace deal for Ukraine. Reports indicate the deal would include concession of land by Ukraine as well as limitations on their armed forces, which may be hard for Zelenskiy to accept. The EIA yesterday update came in bullish against expectations for crude oil, with a larger than expected decrease in stocks last week as opposed to the increase shown in the API report. However, gasoline and distillate stocks both increased contrary to expectations, with gasoline stocks showing the bigger gain. Net crude imports fell due to a jump in exports that was larger than the increase in imports.
PRODUCTS
Yesterday’s EIA report was especially bearish for gasoline, and prices collapsed in its wake. The report showed US gasoline stocks were +2.3 million barrels last week versus expectations for a 200,000 barrel decline. Distillate stocks also came in bearish at up 200,000 versus -1.2 million expected. Implied demand readings ware also down from the previous week for both products, but they were up from a year ago.
NATURAL GAS
Weather forecasts now show colder than normal temperatures across much of North America during the first week of December. A sudden stratospheric warming event is expected to cause instability in the Polar Vortex, which would allow Artic air to come down into the northern US, but there is still uncertainty as to how cold it will be. For the EIA gas storage report today, the Reuters poll has an average expectation calling for a net draw of 13 bcf for last week (range -3 to -21 bcf ). This would be the first draw of the season, but that is not unusual for this time of year.
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