API Report Bullish Against Expectations

CRUDE OIL

December Crude Oil is lower this morning and back near the bottom of the summer’s range. The main negatives for the market this week have been the startup of pipeline flows from Kurdistan to Turkey, expectations that OPEC+ will increase its production target for November when they meet this Sunday, the “Peace Deal” for Gaza that could ease tensions in the region, and the government shutdown, which can have a negative demand effect. On the positive side has been damage to Russian oil infrastructure from Ukrainian drone strikes, but would appear to be more supportive for the products than for crude oil, as Russia has moved to limit gasoline consumption and diesel exports in this aftermath.

The API report last night was bullish against expectations for crude oil but not for the products. The report showed US crude oil stocks were -3.67 million barrels for the week ending September 26 versus an average expectation from the Reuters poll calling for +1.0 million. Gasoline stocks were +1.3 million versus +700,000 expected, and distillate stocks were +3.0 million versus -1.1 million expected. EIA did release its monthly report yesterday, and it showed US crude oil production in July reaching a record 13.64 million barrels per day, up 109,000 bpd from the previous record for June.

NATURAL GAS

November Natural Gas is higher pushed through the 50-day moving average overnight for the first time since June and traded to its highest level since September 17.  The EIA monthly report showed natural gas production in the US lower 48 states hit a record 121.62 billion cubic feet per day in July, beating the previous record of 120.57 bcfd in June. Texas output was up 1.4% to an all-time high 37.35 bcfd, while Pennsylvania output fell 2.2% to 21.04 billion. LSEG said average gas output for September fell to 107.4 billion cubic feet per day (as of the 29^th), down from a record 108.3 bcfd in August. The 6-10 and 8-14 day forecasts are a little warmer today than yesterday, with above normal temperatures persisting in the eastern two-thirds of the nation and the below normal temps disappearing out west.

PRODUCTS

The API report leaned bearish for the products, with gasoline stocks were +1.3 million versus +700,000 expected and distillate stocks +3.0 million versus -1.1 million expected. Refinery runs are expected to be -0.9% at 92.1%, still the highest in at least six years. The weekly EIA report may not be released due to the government shutdown, but there has been no indication whether it will be or not.

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