CRUDE OIL
With crude oil prices tracking lower this morning despite signs of strong Chinese oil imports, the bear camp is clearly embracing the negatives and discounting the positives. In fact, Chinese January through October crude oil imports were 473 million tons versus 413 million tons in the previous year. However, despite deteriorating global views toward the Chinese economic situation and debt contagion fears, Chinese trade data showed strong imports of soybeans, crude oil, copper, and Iron Ore and that should provide a measure of macroeconomic optimism. Certainly, it is possible that Israeli offers for a “cease-fire if hostages are released” could be seen but that is not a new offering and was clearly ignored by Hamas last week. On the other hand, the resolve of Hamas might be eroding from the ending bombardment and rising internal pressure from a humanitarian disaster could result in some hostage releases. Clearly, news that Saudi Arabia and Russia will extend restraint is heavily offset by record US crude oil production perhaps because of softening global demand expectations. Bearish sentiment is further entrenched by the lack of lift from very strong Indian oil product consumption readings and very upbeat global economic expectations from OPEC.
NATURAL GAS
After perusing overnight headlines, it is not surprising to see natural gas poised to make fresh contract lows directly ahead. While not a major negative supply issue Ukraine has indicated they will increase production by 500,000 cm per day but given a fresh record US gas production reading of 108.0 bcf on Sunday supply is clearly negative. In fact, US production is expected to hold above 107 bcf per day this week. US temperatures remain bearish with the latest 6-to-10-day forecast projecting above average temperatures across the US Midwest. However, US LNG exports remain in a “sweet spot” for the exporters, and they continue to hold above the 14 bcf per day level and have underpinned prices this week.
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