Current Market Prices
Crude Oil
Prompt month contract continued its downward trajectory yesterday, settling $0.58 lower to $80.44/bbl as traveling season winds down and we transition into the winter months. Many also see the price retreat as a signal that the Palestinian/Israeli conflict may be somewhat easing. Another lesser known/discussed factor playing into the recent downward pressure on WTI is freight costs to move crude around the globe have increased by approximately 50% since the Hamas attack on Israel, per Bloomberg. On the flip side, Saudi Arabia and Russia have signaled they are prepared to extend their production cuts for as long as needed to ensure they get the prices they want. Storage remains below 5yr averages despite adding nearly a million barrels to its stock from the previous week. Cushing is also well below its 5yr average - adding 300k to its stock. The market may have pulled back a bit too much, too quickly as Dec 2023 futures are up $2.00 on the day to $82.44/bbl, perhaps a good buying opportunity for traders.
Full report here: U.S. Weekly Petroleum Report
Rig Count Update
The weekly U.S. saw a huge 20-rig drop off on the week, down to 685 and now sits at its lowest level since Dec 2021. Oil based rigs dropped nine to 557 while gas based rigs lost 11 to 128. The 685 count is lower by nearly 200 rigs from the same week a year ago. The loss on the week gave back all and then some from the 15 rig gain in the prior week. Despite the setback several large drilling companies, including Nabors Industries, are bullish going into 2024. “In the Lower 48, rig counts decreased in the third quarter but it appears to have bottomed,” CEO Anthony Petrello said in a recent earnings release. “During the third quarter, we saw the early signs of the expected market return.”
Natural Gas
Natural gas futures have hung around the mid-$3 range for most of the week. Colder weather and freezing temps passing as far south as Texas aided in the steady pattern. The longer-term forecast looks to push in milder temps and should have much of the US at above average temps. Both US & European storage is still running above the 5-year average and coupled with the mild weather should continue to present resistant for prices. According to the EIA, US natural gas production is ahead of national demand this year. After a mild winter and slow economy, inventory climbed above normal this spring, but the hot summer did boost consumption and cut into the surplus. In LNG news, October marked the second-highest monthly level on record as US LNG producers ramped up exports. Europe continues to be the principal buyer of US LNG, currently purchasing 60% of all exports. For now, look for prices to stay in the bearish structure as we wait for the turn to a colder weather outlook.
The warmer temp forecast has weakened prices and lowered demand in the Midcontinent. Chicago city-gates spot prices are trading at a $.46 discount to Henry Hub at $2.73 while ANR and NGPL are $.55 and $.58. In the futures market, Chicago city-gates is trading a $.27 premium to Henry Hub while ANR OK is a $.53 premium, while NGPL Midcon is $.03 back. According to S&P Global Commodity Insights data, heating demand in the Midcon is expected to drop to just under 13 bcf/d. Net inflows into the region have decreased to 10 Bcf/d, as outflows to Eastern Canada increased by 1.5 bcf/d, which was the highest seen since May.
The EIA released storage numbers this morning, coming in at 3,779 Bcf, representing a net +79 Bcf increase from the previous week. This increase was within range of marketplace expectations of +75-80 Bcf increase. Stocks were 293 Bcf less this time last year and come in 205 Bcf above the 5 yr. historical range of 3,574 Bcf.
Natural Gas Liquids
Product prices were mixed in both Mont Belvieu and Conway compared to a week ago. Prompt month MB Isobutane saw the biggest gain at 9% while Conway N. Gasoline was the biggest loser, down 5% from a week ago. All other products kept with a 5% or less gain or loss. Products as a % of WTI were all higher thanks to a fairly steep drop in crude prices, which was down roughly 6% WoW.
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