Speculators Follow the Fundamentals

November 20, 2023

Energy commodities exhibit a turbulent environment as supply and demand dynamics significantly affect the money-managed funds. 

Crude Oil

Four month low from WTI speculators’ bets

  • WTI crude oil futures rose toward $76 per barrel on last Friday’s session, cutting the 5% plunge from the prior session that took prices to their lowest since July, but still on course to book its fourth consecutive weekly loss amid concerns of low demand and respite to supply.
  • Money-managed funds hit a 4-month low, as fundamental data sent bearish signals to speculators.
  • The latest data from the EIA showed that crude oil stocks in the US rose by 17.5 million barrels in the last two weeks, taking inventories to their highest in 2.5 months.
  • Additionally, higher output from non-core OPEC members added some relief to global supply levels, softening the impact of repeated output cuts from Saudi Arabia and Russia.
  • Furthermore, EIA report pointed to a 7.6% decline in fuel product supplied from the earlier week halfway through November, consistent with the body’s earlier report that stated the oil market will not be as tight as initially thought.



Demand supports the gasoline prices

  • US gasoline futures fell to the $2.2 per gallon level, heading toward the 11-month low of $2.12 touched on November 8th amid persistent evidence of muted fuel demand and a shift to a more cost-effective winter-blend for gasoline.
  • Money-managed funds for gasoline futures stood at a 2-month high, as of November 14th, as demand increased and supply fell in US.
  • EIA stated it anticipates a 1% decline in US gasoline consumption in 2024, which would mark the lowest per capita gasoline consumption in 20 years, driven by factors like remote work, improved fuel efficiency, high gasoline prices, and persistent inflation.
  • Furthermore, EIA data showed that product supplied in the US, a key demand gauge used by energy markets, fell by 544k barrels on the week ending November 10th.
  • In addition to this, gasoline stocks in the US fell by 1.5 million barrels, limiting the decline in prices.


Natural Gas

Speculators’ funds in two month low, amid solid shortage

  • US natural gas futures fell more than 3.5% to below $3.0/MMBtu, the lowest in five weeks, after EIA reported a bigger-than-expected storage build and forecasts for mild weather that should keep heating demand low and allow utilities to keep injecting gas into storage.
  • Speculators’ funds fell to a 2-month low level, as inventory remains strong.
  • US utilities added 60 billion cubic feet (bcf) of gas into storage last week, more than expectations of a 40 bcf increase.
  • Utilities could keep injecting gas into storage during the weeks ended Nov. 17 and Nov. 24 if output remains at record highs. So far in November, average gas output rose to 107.2 billion cubic feet per day (bcfd), up from a record 104.2 bcfd in October.
  • Also, the expectation of warmer-than-normal weather until November 21st is reducing heating demand, further dampening the need for natural gas.