Outlook: After a strong settle yesterday on the expiring November contract, the now-prompt December contract has taken the opposite approach today and is pushing against the lows today with current losses of 2.44 at $80.98. For now we can view today’s move as a correction within a bull trend, however a settle below $80.78 would be a key reversal lower. There is starting to be increased concern about high energy prices and its impact on global economic progress.
- Cushing, OK crude inventories are at 3-year lows near 31 million barrels and are about half of year-ago levels as backwardation discourages storing. Total US crude stocks are more than 27 million barrels below the 5-year average.
- The World Bank says a surge in energy prices poses “significant” risks in the near term for global inflation.
- The US national median home price in September was $352,800, up 13.3% from a year earlier and existing home sales rose more than expected in September. It is quite the opposite in China, where home prices dropped for the first time since 2015 amid a sharp fall in existing home sales.
- China’s crude oil imports fell 2% y/y.
- UBS increased their Brent price forecast to $90 for the Dec-Mar time period, up from $80.
- The OPEC+ meeting in early November could be interesting. Iraq’s oil minister is reportedly seeking more production availability and prefers crude in the $75-$85 range.
- As of 10:33 am CDT: Brent crude oil down $2.20 at $83.62, US dollar index up 0.044 at 93.602, while the nearby e-mini S&P 500 futures contract is down 9.00 at 4,519.00.
- ULSD is being knocked the hardest today with current trade in the nearby down more than 6 cents at 2.5300.
- Group 3 and Chicago ULSD basis has been in a downward trend as supply availability is viewed as relatively ample.
- Nearby RBOB is pushing against its lows on the day as I write with current trade down nearly 5 cents at 2.4600.
- Initial moves this morning on propane were lower with Conway viewed down ¾ cent.
- As you think about crop drying needs for next year, consider that currently high fertilizer prices compared to Dec 22 corn futures may lead to a lower corn acres next year and in turn lower propane used for drying purposes.
- Natural gas held in US storage rose 92 bcf last week, EIA data showed today, slightly above consensus estimates for a 90 bcf increase. At 3.461 tcf, stocks are 11.7% below year-ago levels and 4.2% below the 5-year average. Current weather patterns suggest an above average build could be seen next week as well, which would reduce the deficit further.
- Nearby natural gas futures are down 8.2 cents to 5.088 and with winter/winter and winter/spring timespreads weakening natural gas maintains a heavy feel. However, the 50-day moving average has acted as solid support the last two days at 4.920.
- FERC is scheduled to discuss items related to increased capacity at the Corpus Christi and Sabine LNG facilities. Upon approval, it would increase throughput capacity by 0.8 bcf/d at these two facilities.
Total US natural gas in storage: