Written Commentary
The Ghost in the Machine Q4 2024
November 15, 2024
CRUDE OIL
December Crude Oil extended its recovery overnight and almost closed the gap from Monday’s sharply lower open. Reports that Iran is preparing a retaliatory strike against Israel in the coming days have supported the market over the past 48 hours. There is also talk that OPEC+ could delay the partial lifting of output quotas that had been scheduled for December. The group had already postponed this action earlier this fall due to a drop in prices. EIA reported that US oil production rose 1.5% in August to a monthly record high of 13.4 million barrels per day. That beat the previous record high of 13.31 mbpd from last December. The surprise decline in US crude stocks support the market this week, but the large decline in gasoline stocks got even more attention. Gasoline stocks are the lowest since September 2022, and the second lowest for this point in the year in at least six years. Industry executives seemed to turn a bit more optimistic about Asian demand this week after the latest news about Chinese stimulus measures. It seems like we are back worrying about Mideast escalation, even though so far there has been no real impact on global supply.
PRODUCT MARKETS
Product prices are finding support from the recovery in crude oil, with RBOB seeing an extra benefit from US gasoline stocks falling to their lowest since September 2022 and the second lowest for this point in the year in at least six years.
NATURAL GAS
December Natural Gas was lower again overnight after a move to new contract lows yesterday. Mild weather in the US has lowered heating demand and has allowed US storage to build at a faster pace than what was expected after production dropped off earlier this year. Yesterday’s weekly EIA storage showed EIA gas storage for the week ending October 25 was 3,863 bcf, +78 bcf from 3,785 the previous week. This was near the low end of trade expectations from +75 to +92 and right in line with the five year-average increase for this week. This is in contrast to the lower-than-average builds earlier this fall. Storage was up 2.2% from a year ago and 4.5% above the five-year average versus +2.3% and +4.6% the previous week. Warm weather forecasts continue, with the 8-14-day showing above normal temperatures across the lower 48.
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