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Production Remains Off-Line


With the crude oil contract this morning forging a higher high and reaching the highest price since August 3rd, the lingering US production losses are combining with favorable equity market sentiment to lift prices. Apparently, the bull camp is unfazed by ongoing demand concerns and from news that Asian refineries did not inquire about supply above their contractual levels for October.

Even though the supply situation in gasoline from residual refinery closures is supportive, the gasoline market did not show as much bullish sensitivity as crude oil last Friday. We attribute that to the probability of the return of more US refineries and declining seasonal demand in Europe and the US.


While the natural gas market is significantly short-term overbought from more than $1.25 in gains over the past 3 weeks and should be restricted by the bearish larger than expected storage injection last week, the most recent positioning report showed the market maintaining a rather large “net spec and fund short”. In looking forward the latest US temperature forecast shows two thirds of the US locked in a much above normal temperature pattern and that increases the likelihood that US inventories will be “tight” into the beginning of the heating season.

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