Written Commentary
CRUDE OIL
January Crude Oil market may be seeing some pressure this morning from the US CPI number, which came in at a 2.6% annual rate, which was expected but also up 0.2% from September, on ideas that it could discourage the Fed from cutting rates at upcoming meetings. The market has already seen a sharp selloff this week in the wake of disappointment over China’s stimulus plans, more dismal demand data from China, and ideas that the reduced regulations under the incoming Trump administration would result in a sharp increase in US production. API has asked Donald Trump to scrap many of the Biden administration’s policies aimed at fighting climate change, including vehicle emissions standards, the pause on export permits for LNG, and the fee on methane emissions. Iran’s oil minister said overnight that they had made plans to sustain oil production and exports and were ready for possible restrictions from the US. The API report will be released this afternoon and EIA tomorrow, delayed a day by the holiday on Monday. A Reuters survey has an average trade expectation for US crude oil stocks increasing 100,000 barrels last week, with gasoline up 800,000 and distillates up 1.2 million. Refinery runs are expected to be up 0.6% to 91.1% of capacity. Russia’s seaborne oil product exports in October fell 7% from a month earlier to 8.861 million metric tons due to seasonal and unplanned maintenance at refineries. OPEC lowered its global demand growth forecasts for 2024 and 2025 this week due to slow demand from China. IEA will publish their latest estimates tomorrow. They have been consistently lower than OPEC in their forecasts.
NATURAL GAS
January Natural Gas is lower this morning following a three-day rally to a three-week high. For the EIA storage report tomorrow, the trade is looking for an increase in US natural gas supply of 26 to 48 bcf for last week. The five-year average change for this week is +28 bcf. After narrowing the surplus to year-ago and five year average supply for the past several months, that surplus has begun to widen because of mild weather and slow demand. The 8-14 day forecast shows a shift to more seasonal weather, with even an expansion of cooler than normal conditions centered on Texas and the southern Plains. The Biden administration has asked the EU to ensure LNG shipments that meet US methane regulations automatically comply with Europe’s standard for imports. This would safeguard the US’ growing LNG trade with Europe while also cementing Biden’s methane rules, even if they are eventually repealed by the Trump administration. The US is the world’s top oil and gas producer, and LNG exports surged after Russia invaded Ukraine.
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