Written Commentary
CRUDE OIL
October Crude oil was near unchanged overnight following yesterday’s recovery. More than half of Libya’s output was offline on Thursday, and exports were halted at several ports due to a standoff between rival political factions. Around 700,000 barrels per day were offline, and analysts warn that it could reach 1 million bpd. Iraq plans to reduce output in September as part of a plan to compensate for producing over their OPEC quota. They produced 4.25 million bpd in July and said they will cut output to 3.85-3.90 million bpd in September. Their quota is 4.0 million bpd. Lower demand from China and OPEC+ plans to unwind some of its output cuts in October are nagging problems for crude oil prices. EIA crude oil stocks fell less than expected last week and have climbed above year ago levels first time since late June.
PRODUCT MARKETS
October RBOB was higher overnight, extending yesterday’s recovery and outside day higher. The market has drawn support from the crude oil market, which has benefited from a cutoff in production from Libya, but it may have also been supported by an improvement in the US demand outlook this week. EIA gasoline stocks fell more than expected last week and are the lowest they have been this year. Implied gasoline demand is holding up well, increasing to 9.307 million barrels per day last week vs 9.193 million the previous week and 9.068 million a year ago. October ULSD gapped higher overnight following yesterday’s reversal higher from 14-month lows. US distillate stocks increased last week versus an expected decline, which was what helped send the market lower this week, but the market has drawn support from Libya. US stocks are above a year ago but well below the five-year average for this week.
NATURAL GAS
October Natural Gas traded to its highest level since August 26 this morning on follow through from yesterday’s bounce, but it found resistance at the 9-day moving average at 2.180. Yesterday’s EIA Natural Gas storage report came in at the low end of trade expectations, which helped the market lift clear of Wednesday’s lows. EIA Gas storage for the week ending August 23 was 3,334 bcf, +35 bcf from 3,299 the previous week versus trade expectations calling for +33 to +55. Storage was up 7.0% from a year ago and 12.0% above the five-year average versus +7.0% and +12.5% the previous week. The surplus to year ago levels has narrow over the past several weeks. The weather forecast show a mix of warmer and cooler than normal conditions across the US. This could provide support cooling demand in the west and perhaps some heating demand in the Great Lakes and New England.
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