Written Commentary
CRUDE OIL
Crude oil prices rebounded from early pressure and finished Thursday with sizable gains, and they have seen significant upside follow-through to reach a new 6 1/2-month high. With already steep gains early in today’s action, however, crude oil may need to see positive US jobs data to extend its late December/January breakout move even further to the upside. Comments by Chinese Vice Finance Minister Liao Min to expect more “proactive” fiscal policy moves have helped to soothe Chinese demand concerns and have boosted energy prices. Although Saudi crude exports to China during February will decline 5.4% from January’s exports total, the latest Chinese CPI and PPI readings were in line with trade forecasts, which also helped to soothe Chinese energy demand concerns and underpinned crude oil prices. In addition, cold weather in the US and Europe over the next few days (particularly in Texas where a large part of the US energy infrastructure is located) is providing support across the energy markets.
NATURAL GAS
Natural gas prices were able to close Thursday with moderate gains and followed through with an early rally to a 1 1/2-week high this morning. The market is heading for a sizable weekly gain as natural gas continues to find support from stronger near-term demand. This week, cold weather across large portions of the US has increased residential heating and power plant demand for natural gas, which has underpinned prices. After a lower-than-expected weekly draw in the latest EIA storage report, natural gas is looking at several “triple-digit” weekly declines in a row through the end of January. Norway’s 2024 gas production reached a record high of 124 million tonnes, which may diminish European demand for US LNG exports.
PRODUCT MARKETS
Both product markets finished Thursday with moderate gains and have extended their January rally with sizable early gains this morning. ULSD remains the strongest member of the petroleum complex, as cold weather over large areas of the lower 48 states will ramp up demand for heating oil. Refineries in Texas and Louisiana may have to scale back output due to incoming cold weather, which has given across-the-board support for product prices. Motiva’s Port Arthur facility (one of the largest-capacity refineries in the US) has scheduled maintenance shutdowns later this month, giving further strength to both RBOB and ULSD. While crude oil refinery net input continues to rise at the start of the new year, there has been a buildup in gasoline and distillate stocks that implies lukewarm near-term demand.
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