CRUDE OIL
March Crude Oil is higher today in the wake of an announcement by OPEC+ that the group has agreed to delay a planned December oil output increase by one month. This was not a surprise, as there had been rumors to that effect late last week. The group has had plans to gradually lift its quotas, but they have been postponed twice due to lower than expected demand and weak prices. The CEO of British Petroleum said that tension in the Middle East is the top risk facing energy markets. Iran say they will retaliate for Israel’s retaliation. Crude oil sold off sharply last Monday after Israel chose not to attack Iranian oil infrastructure. Both sides seem to be showing some restraint. There has been no interruption in crude oil supply since this conflict started a year ago, but worries remain. China National Peoples’ Congress is meeting this week, and the size of the intended fiscal stimulus is expected to be announced by Friday. This could excited energy markets if the size and structure of the stimulus reverse concerns about China’s oil demand. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 17,931 contracts of crude oil for the week ending October 29, reducing their net long to 95,842.
PRODUCT MARKETS
Mild weather may be supporting late-season driving demand, and we are also approaching an important holiday travel period later this month. EIA gasoline stocks are low, even for this time of year. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 3,459 contracts of RBOB for the week ending October 29, reducing their net long to 46,586. This is right in the middle of the historic range. US weather remains on the mild side, but a strong US economy supports diesel demand, and we are approaching a heavy shipping period. Managed money traders were net buyers of 675 contracts of ULSD, reducing their net short to 25,641
NATURAL GAS
January Natural Gas gapped lower overnight and traded to a new contract low, but it has been working to close that gap this morning. Recent mild weather in the US has lowered demand and allowed US gas storage to build at a normal rate. Unfortunately for the bulls, this has done little to correct the oversupply situation. Up until a few weeks ago, the surplus to year ago and five-year average levels had been shrinking, but that has since stabilized. There is a potential hurricane developing in the Caribbean Sea, but at this point it does not appear to pose much of a threat to US LNG infrastructure. The US National Hurricane center believes the storm will become a hurricane as it moves across western Cuba but then weaken to tropical storm status in the Gulf of Mexico. The 6-10 and 8-14 day forecasts show an expansion of below normal temperatures mostly west of the Rockies and above normal temperatures east. This could keep heating demand low in the northern Plains, Midwest, Great Lakes and the Northeast. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 2,480 contracts of natural gas for the week ending October 29, increasing their net short to 132,888.
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