Written Commentary
NATURAL GAS
Clearly, the charts remain bearish following yesterday’s new contract-low price and with the trade spiking prices below psychological even number pricing of $3.00 in the October contract. Unfortunately for the bull camp, record US production and burdensome and rising working gas in storage continues to overwhelm demand especially with US exports having little capacity to expand. In fact, US LNG exports have had difficulty remaining at full capacity because of periodic mechanical issues.
CRUDE OIL
While the crude oil market managed a second rejection of sub $62.50 pricing yesterday, we suspect the market was supported by news that the US and China extended their tariff truce until November 10th. However, the bulls will likely remain on edge with the Trump/Putin talks looming on Friday as Russia could be seen as the critical linchpin to the global crude oil price structure. In fact, seeing the threat of interrupted Russian oil supply flow ended could result in a four dollar or five dollar premium being extracted from prices! Apparently, tropical storm Erin is forecasted to become a category one hurricane sometime early on Thursday and while it is way too early to predict a track, the forecasted track out to Sunday (when it is projected to be a category three hurricane) looks to “stay out of the Gulf of Mexico”.
PRODUCTS
We see RBOB particularly vulnerable to downside action, especially with the market at times trading five cents above the recent spike low. On the other hand, reports of trade house buying, Asian gasoline margins reaching the highest level in 30 days, expectations of a draw in EIA weekly inventories and the presence of a hurricane threat has embolden the bull camp.
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