Yes, they called it the streak, but streaks are meant to be broken. Oil prices closed modestly higher after ending at 12, the longest streaks of consecutive down days in the history of the global oil market. The reason for the downward spiral is concerns about global economic growth, as well as the fact that President Donald Trump granted waivers to Iranian oil buyers. The reason for the pause is the fact that OPEC was committed to announcing a production cut. OPEC kept raising its production cut number that would somehow stabilize the market. OPEC kept throwing out numbers, starting at 500k and raising it up to 1.4 million before the market even started to pay attention to them. OPEC had to make noise because after they failed to respond to President Donald Trump’s tweet, the market thought that they would be afraid to cut output. OPEC needs to get its mojo back because the market believes that President Donald Trump is setting their policy. OPEC, of course, is justifying its call for a cut because it cut its forecast for global economic growth to 3.5% for 2019 from 3.6% previously, saying that “the slowdown in the global economic growth trend has become more accentuated lately.”
Oil inventories may be key today as API reported another shocking headline crude oil increase. API reported a whopping 8.79-million-barrel increase in supply. The number was shocking, not to mention mind-boggling but not as shocking as another big drawdown in U.S distillate supply. Crude oil selling reaction was muted because distillate supply fell by 3.224m/b, driving those inventories at least 8% below the five-year average. Not very comforting going into winter and raising fears that we may see a spike at some point in the ultra-low sulfur diesel like we saw in natural gas yesterday.
Talk about a price spike! Nat Gas had its biggest jump in 8 years, surging 16% breaking through the 30 cent circuit breaker leading to expanded circuit breaker limits of 50 cents today. Storage levels at the lowest level since 2005 and with an early cold blast, it is raising fears about storage levels being adequate to get us through the winter. While part of the price spike was some hedge funds blowing up, the spike should serve as a warning sign to not be too complacent about low supply levels. Not only for Natural gas but distillates that are falling further and further behind the acceptable levels of comfort. The soft spot in distillate should support the whole complex as the market needs supply.
