Energy Enters a New Era

Crude Oil

WTI offset mid-week gains on China uncertainty

• WTI crude oil futures fell by 3% to $70 per barrel amid renewed demand concerns after China’s recently announced stimulus measures fell short of market expectations, nearly offsetting gains made after Donald Trump’s re-election in the US.
• China’s top legislative body approved a $1.4 trillion package to help local governments manage off-balance-sheet debt but withheld additional fiscal stimulus, disappointing investors amid growing economic uncertainties.
• Oil prices were already under pressure as supply risks eased, with Hurricane Rafael, which had disrupted US crude production, expected to weaken and gradually move away from Gulf Coast oilfields.
• Initially, crude prices dipped as the dollar strengthened following Trump’s comeback, though prices later rebounded on speculation that Trump may impose sanctions on Iranian oil supplies.
• Speculators increased their net long positions by 41.3k contracts, the largest rise in 8 months, immediately following Trump’s election, as his presidency is expected to prioritize conventional energy commodities over the green energy transition.

Gasoline

Prices remain close to the $2 mark amid export concerns

• US gasoline futures held near $2 per gallon as Trump’s election win and a stronger dollar put pressure on dollar-denominated commodities.
• Analysts suggest Trump’s policies could slow China’s economy, potentially reducing demand from the world’s largest oil importer.
• Net exports were reported unchanged (as of Nov 1, 2024) compared to the same period last year.
• Additional downward pressure came from EIA data showing gasoline inventories increased by 412k barrels, while a slight rise in gas demand to 9.15 million bpd was reported.
• Meanwhile, US Gulf producers began halting operations and evacuating staff as Tropical Storm Rafael, expected to reach Category 1 hurricane strength, approaches offshore fields.

Natural Gas

Natural Gas sees upward movement, despite higher-than-expected buildup

• US natural gas futures rose above $2.70/MMBtu, on track for weekly gains, driven by forecasts for cooler weather and higher-than-expected heating demand.
• At the same time, lower production levels due to pipeline issues and Gulf of Mexico curtailments ahead of Tropical Storm Rafael added upward pressure on prices.
• Energy companies had already reduced production in the Gulf by about 10%.
• Meanwhile, the EIA reported a 69 billion cubic feet (bcf) increase in gas storage for the week ending Nov. 1, slightly surpassing the forecasted 65 bcf and significantly higher than last year’s 19 bcf gain.