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Pre-Holiday “risk on” Mood Provides Mild Support


The crude oil market stayed in a tight range overnight, but it was able to shake off early pressure to reach a new 4-week high. The market saw a bullish outcome from the weekly EIA report yesterday, with crude stocks falling by much more than expected and the year-over-year deficit jumping sharply. However, the most important news might have been reports that US production fell, as many analysts had thought it was poised to rise consistently. The market should derive support from the latest evidence of over-compliance by OPEC+ with their November production restrictions.

Gasoline and diesel have outperformed crude oil overnight. A fire at a major Texas refinery, one of the largest in the US, could lead to supply disruptions, and that has added to support. The weekly EIA report was bearish to the gasoline market yesterday, but the product trade remains focused on big-picture demand. Earlier this week the American Automobile Association predicted holiday driving would be sharply higher than year ago levels as many are concerned about taking public transportation. The EIA report showed gasoline stocks increasing 5.533 million barrels last week, which was much higher than expected.


Natural gas has come under pressure over the last few hours from a steep selloff in European prices. So far US markets have avoided a steep drop, but then again, they did not see the steep rally that Europe had. There have been huge declines in European prices overnight, with UK down 19% and Dutch TTP down almost 15%. This came after a Kremlin representative stated that Russia intends to meet all its gas supply obligations. Profit taking ahead of the holiday could also have played a role in the decline.

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