Energy Report: WTI, Brent, Oman, Dubai Crude Oil + US NAT GAS
WTI Crude Oil
Nov WTI Crude Oil prices moved higher during Tuesday’s US trading hours and marking a higher high in the process. Early support for the market came on optimism that US lawmakers might be making a bit of progress toward resolving the government shutdown/debt ceiling debate. Some traders attributed the US morning advance in Crude Oil back above 104.00 to the combination of Short-covering activity following Monday’s reversal and a measure of weakness in the USD Index (DXY). The latest Short-Term Energy Outlook from the EIA slightly lowered their Y 2013 global Crude Oil demand outlook to 90.26-M BPD. While slightly lower compared to the September estimate, it is still 1% higher than demand seen in Y 2012. Trading activity in the Crude Oil market turned choppy during the US afternoon hours as equity markets dove and US lawmakers continued the finger pointing. Nov Crude Oil prices looked to stabilize around 103.50, which could represent a near term pivot mark in overnight and Wednesday’s trade. Looking ahead, expectations for this week’s EIA Crude Oil inventory report are for a build in US supplies last week in the range of 1.75 to 2.0-M bbls.
Nov Brent Crude Oil prices moved higher during most of Tuesday’s session but seemed to struggle at 110.75. The day’s gain took prices to their highest level since 19 September, and marked the 3rd straight higher close. The Novr Vs. De Brent Crude Oil calendar spread narrowed for the 3rd session in a row, down a total of nearly 0.20 during that frame. Traders attributed the added weakness on prospects for an elevated amount of November loadings. The latest estimates for November loadings for the 4 primary Crude Oil grades that comprise the Brent benchmark are expected + 12% from October marks. This boost in near term supply flow, coupled with the rebound in Libyan and Iraqi supplies provided an added drag on near term Brent pricing. Meanwhile, the cash market for North Sea Forties was supported, with speculation for increased demand from Asia in the coming month.
Dec Oman Crude Oil prices gapped higher open and trended higher throughout the session. This helped the Dec contract climb above 107.00 and to the highest level since 13 September. Volume was heavy during Tuesday’s session and well above recent averages. It is possible that some of the early lift came on reports of poor weather in the Gulf region, which cut export flows out of Iraq by 67%. The Dec Vs. Jan Oman Crude Oil calendar spread collapsed, down a total of 0.60 during the past 2 trading sessions. Other factors that seemed to have little impact on Tuesday’s higher trade was the set back in the Dubai Crude Oil crack spread back toward the 2.50 mark, the shutdown of a Key Japanese refinery after a fire Monday and new 5 month low in spot premiums for Russian ESPO. Some cash traders indicated that the lower trade for the Russian grade weighed on sentiment and could be a factor that plays out in the coming sessions.
Nat Gas prices have been in rally mode for the last 2 sessions with no strong reason for the move. Participants seemed to be focused on the changing weather patterns that should start to see some heating demand appearing over the next several weeks. Also, the rally has also been fueled from a technical perspective as prices failed several times to stay below the 3.50/mmbtu level after it breached this level on a post inventory report basis last week. The market may be starting to form a pre-winter heating season bottom.
Tuesday the EIA released their latest Short term Energy Outlook and their Winter Forecast
As of 27 September, working Gas stocks totaled 3,487 Bcf, which is 155 Bcf less than at the same time last year, and 49 Bcf greater than the previous 5-yr (2008–12) average for that week. EIA projects inventories will total 3,830 Bcf at the end of the injection season, and 1,890 Bcf at the end of March 2014, the end of the Winter heating season.
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