CRUDE OIL
December Crude Oil was near unchanged overnight following a big reversal lower yesterday. Prices plunged on the possibility of a Hezbollah-Israel cease fire, as the group appeared to be backing off from requiring a cease fire in Gaza as a condition. However, the peace impulse may be short lived, as Hezbollah targeted Israeli soldiers with artillery shells and rockets along the Israel-Lebanon border overnight. There are still concerns that Israel may attack Iranian oil infrastructure, but the likelihood of that has been a matter of debate. China’s finance ministry said it will provide details on it plans to provide fiscal stimulus at a news conference on Saturday. This comes after a news briefing yesterday that was short on details and disappointed the market. The API report yesterday afternoon showed crude stocks rising a whopping 10.96 million barrels last week, with gasoline stocks down 557,000 and distillates down 2.6 million. The EIA report will be released later today. Average expectations call for a 2.0 million-barrel increase in crude oil stocks, with gasoline expected to be down 1.1 million and distillates down 1.9 million. Refinery runs are expected to be down 0.1% to 87.5%.
In its short-term energy outlook, the EIA projected world oil demand to grow 1.2 million barrels per day 104.3 million in 2025, down 300,000 from previous forecasts. 2024 demand expected at 103.1 million, down 20,000 bpd from previous number.
PRODUCT MARKETS
RBOB and ULSD both saw outside reversal days lower yesterday in lock-step with crude oil.
NATURAL GAS
Hurricane Milton strengthened to a Category 5 storm overnight and is expected to bring heavy damage to the Florida peninsula, which could weaken US gas consumption due to power outages. For the US storage report this week, traders are looking for an injection of 66 to 77 bcf. The five-year average injection for this week is 98 bcf. The 6-10 day forecast calls for below and much below normal temperatures east of the Mississippi, which could boost heating demand in the medium term. However, these trends moderate in the 8-14 day, as warmer than normal temperatures spread eastward.
The EIA’s short term energy outlook yesterday forecasted US natural gas production at 103.5 billion cubic feet per day in 2024, up from a forecast of 103.4 in September but down from the record 103.8 in 2023. Several drillers reduced activity in the wake of price declines earlier this year, but US gas rigs in operation have increased the past two weeks, as drillers seem to be responding to recent prices gains, the reduced US surplus, and the projections for expanding LNG exports.
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