Written Commentary
CRUDE OIL
December Crude Oil extended yesterday’s rally overnight and traded right up to the 100-day moving average. News that President Trump will meet with Chinese President Xi Jinping next week in to Asia opens the door for a some sort of trade agreement that could ease concerns about demand. It also may encourage China’s cooperation on the new round of sanctions the US has put in place against Russian crude oil. The two companies targeted by the sanctions, Rosneft and Lukoil, together produce around 5% of global oil supplies and their exports have accounted for 47% of total seaborne exports of 3.5 million bpd, according to analytics firm Kpler. Russia has been able to circumvent previous sanctions, but the new ones may have more teeth because they theoretically expose any company doing business with them to sanctions as well.
NATURAL GAS
December Natural Gas were weaker overnight in follow-through from yesterday’s decline off a bearish EIA report yesterday, which showed US gas storage for the week ending October 17 +87 bcf from the previous week, above the average trade expectation of +81 and at the upper end of the range of expectations from +72 to +87. The five-year average change for this week is +69. Storage was +0.6% from a year ago and 4.2% above the five-year average versus +0.4% and +3.8% the previous week. This pattern could change next week now that some more seasonable weather has arrived to the eastern half of the US.
PRODUCTS
December RBOB extended yesterday’s rally overnight but December ULSD did not. Both are a bit lower today and appear to be consolidating this week’s gains. ULSD traders may be suffering a hangover from the smaller than expected decline in US distillate stocks last week versus the larger than expected decline in gasoline. However, the arrival of more seasonable weather to the eastern part of the nation should allow a boost in heating oil (diesel) consumption this week.
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