Written Commentary
CRUDE OIL
Despite a risk on vibe early in the Friday trade crude oil prices are trading minimally higher and within yesterday’s range. While the energy markets should derive support from Russian charges that the US was responsible for the pipeline explosions in the Baltic Sea and the US has implemented fresh embargoes on Iran, the threat of demand destruction hangs in the marketplace. Despite horrific damage on shore in Florida and the southeast coast of the US, the potential supportive influence on energy prices from the hurricane has dissipated. Indirect pressures on crude oil prices are seen from ongoing Chinese intentions to ramp up product exports and from labor disruptions at four French refineries. With hurricane Ian tracking well clear of Gulf Coast energy infrastructure, slightly more than 150,000 barrels per day (bpd) of US crude oil production will come back on-line quickly.
From a big picture perspective, the global outlook for product prices from a supply perspective has shifted negative with strong evidence of increased product export flow from China. However, expanding supply from Asia is offset by a French refinery sector strike and reports earlier this week that European refiners were running short on crude oil feedstocks. There are also reports that 1.5 million bpd of European refining capacity will be off-line next month due to maintenance, strikes at several French refineries and feedstock shortages. Energy stocks at the Amsterdam, Rotterdam and Antwerp hub had a weekly decline of 2.6% as a build in gasoil supplies was offset by draws in fuel oil, jet fuel, gasoline, and naphtha.
NATURAL GAS
Several bearish fundamentals face the natural gas market today. The market should see residual pressure from a 2nd straight larger than expected weekly EIA natural gas storage injection, a narrowing of the US EIA storage deficit to the 5-year average, a 5% jump in daily LNG storage at US export terminals, a significant drop in demand from storm damaged areas and fear of slowing global demand from recession. On the positive side of the ledger, Russia has accused the US of damaging the natural gas pipelines under the Baltic Sea, and there are reports from Siemens energy indicate they do not expect to be able to deliver the long-awaited turbine to the compressor station in Russia.
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