Written Commentary
CRUDE OIL
November Crude Oil is higher this morning as disruptions to US supply from Hurricane Francine and in Libya have helped the market recover from its steep losses from earlier this week. The US Bureau of Safety and Environmental Enforcement said more than 730,000 barrels per day or 42% of Gulf production was shut-in due by Francine on Thursday, which was higher than previous estimates. Exxon Mobil said there appeared to be little significant damage at its 552,000 bpd Baton Rouge refinery. It is the sixth-largest refinery in the US by capacity, and it had cut output to 20% of capacity during the storm. The IEA lowered its 2024 demand growth forecast by more than 7% to 900,000 bpd from their previous forecast, citing weak demand in China and “feeble” growth elsewhere. They see China’s demand increasing by 180,000 bpd, down from 410,000 in their July forecast. The cite slower economic growth in China and the switch to EVs. IEA left its demand growth forecast for 2025 unchanged at 950,000 bod and said the market could be oversupplied if OPEC+ unwinds its cuts as planned. OPEC+ was expected to start doing so in October, but they postponed it by two months last week due to the price collapse. Earlier this week, OPEC cut its demand growth forecast to 2.03 million bpd from 2.11 million last month. They cut China’s expected demand growth to 650,000 bpd from 700,000. The wide disparity between the two groups’ forecasts continues.
PRODUCT MARKETS
October RBOB is higher this morning in synch with crude oil, as Hurricane Francine’s impact on refinery operations along the Gulf coast have been larger than expected, which could tighten gasoline supply a bit. This has allowed the market to recover after the bearish EIA data this week that showed a large build in US supply. The market is climbing off technically oversold levels, and stochastics have crossed positive from very low levels.
NATURAL GAS
Seasonal Supply Growth Slower than Normal
November Natural Gas is slightly higher this morning after a strong rally yesterday in response to a bullish EIA Natural Gas storage report. The report showed EIA Gas storage for the week ending September 6 at 3,387 bcf, +40 bcf from 3,347 the previous week. This was below trade expectations of +49 to +68 and was the smallest increase for this week in at least five years. The five-year average increase is 67 bcf. Storage was up 5.7% from a year ago and 9.7% above the five-year average versus +6.3% and +10.8% the previous week. The surplus to year ago and five year average levels continue to narrow. The market was relieved this week when Hurricane Francine avoided key LNG plants in Texas that had seen disruptions from a previous storm this summer. Natural gas flows to US LNG export plants were on track to fall to 11.7 bcf per day yesterday from about 12.7 bcfd on Tuesday and 13.4 a week ago. Most of the decline due to a sharp drop at the Cameron LNG. Top ports in south and central Texas had reopened.
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