We jumpstart the day with Export Sales, Initial Jobless Claims and Wholesale Trade at 7:30 A.M. Central EIA Gas Storage at 9:30 A.M. and the kicker Crop Production USDA Supply/Demand at 11:00 A.M. We have frost followed by snow as farmers try and wrap up harvest. Also reports of high water in the lower Ohio River closed to navigation on Tuesday at locks and dam 52 in Paducah, Kentucky, which is a key Grain shipping waterway. The Grains will focus on the data released at 11:00 A.M. which most traders speculate we will see higher yields on Corn and lower yields on Soybeans and believe this report will be a yawner and not a game changer. In the overnight electronic session the December Corn is currently trading at 348 which is a ¼ of a cent lower. The trading range has been 349 to 346 ¾.
On the Ethanol Report there were no trades posted in the overnight electronic session. The December contract settled at 1.446 and is currently showing 1 bid @ 1.447 and 1 offer @ 1.466 with Open Interest at 1,436 contracts.
On the Crude Oil front we did have a technical key reversal in yesterday’s outside action but the fundamental news is still a driving force to scare the funds and algorithms from front running heavy short positions as they did in yesterday’s trading session. In the overnight electronic session the December Crude Oil is currently trading at 5680 which is 1 tic lower. The trading range has been 5708 to 5669.
On the Natural Gas front we have colder than normal weather conditions for this time of year which will be the first test of the power grid with the retirement of Coal Plants and Natural Gas producers holding back at these price levels. And if the cold weather sticks around for a while we should see a surge in prices in this commodity. Today’s EIA Gas Storage numbers traders are hearing whisper numbers of the lowest injection in a decade with pipeline issues contributing to this puzzle. The Thomson Reuters poll of 23 analyst participating forecast injection builds from 6 to 32 bcf with the median of 15 bcf. This compares to last weeks build of 65 bcf, the 1-year of 54 bcf and the five-year average of 45 bcf. In the overnight electronic session the December contract is currently trading at 3.195 which is 2 cents higher. The trading range has been 3.197 to 3.152.
— Daniel Flynn
The Energy Report: The big freeze
The fundamentals in the petroleum complex are getting frosty. Oil prices hit another 2 and a half years high before closing lower after the record breaking run of U.S. oil exports ended and as U.S. oil exports suddenly got frozen out. In Saudi Arabia the crackdown on corruption and quest for power turned even more cold after Saudi authorities froze the bank accounts of the former Saudi Crown Prince Mohammed bin Nayef. While oil supply surprisingly rose last week, oil products plunged, a concern as we are supposed to get our first arctic blast of winter as natural gas and distillate supplies are below normal for this time of year. It is a cold world and it is only going to get colder.
Oil had a wild session. It was not sure whether it wanted to focus on the surprise 2.237-million-barrel increase in crude oil supply or the very bullish 3.312 million barrels drop in gasoline supply and the 3.359 million barrels drop in those all-important distillates. Oil also saw some support when the Bureau of Safety and Environmental Enforcement (BSEE) reported that the Coast Guard and the Bureau of Safety and Environmental Enforcement responded to an oil platform fire in the Gulf of Mexico, Wednesday at the Shell l Enchilada platform approximately 112 nautical miles south of Vermilion Bay, Louisiana.
The crude build was a surprise after U.S. oil exports fell from a record of over 2 million barrels a day to only 900,000 a day. U.S. oil production should rise over the next few weeks and production hit a 5-yr high of 9.62 million barrels a day. While that is impressive it is still well below where the EIA said we would be. That is a misread that has longer term ramifications for many shale producers. Many shale producers will hedge but many are so far underwater it might not make much of a difference to their bottom line. This could set the stage for a rash of mergers and acquisitions in the shale space, but they better hurt as they are already well below the demand growth curve.
U.S. demand is surging, rising 2 million barrels a day to a whopping 21.3 million barrels per day. That was even as U.S. export demand fell by 560,000 barrels a day. U.S. refinery runs are smoking, rising by 1.55 last week.
Gasoline prices at the pump will still rise as ready to use ‘gasoline’ stocks fell 5.3MB this week pushing inventories below the five- year average. Distillate supply fell as farmer harvest demand kept things moving along but the refiners are going to have to continue to run crude to keep up with demand and replenish supply. Demand increased 952,000 barrels a day a number that will go higher after winter shows up. And it is here! The first arctic blast.
The Weather Channel is predicting record breaking cold. They predict an arctic blast will slide across parts of the Midwest and Northeast into this weekend. Many cities in the Midwest and Northeast will see their coldest temperatures so far this season. Daily record lows could be threatened in some cities. That chilly air will sweep through the Great Lakes and into the Northeast by Friday, where highs may hold in the 20s and 30s in some areas. Behind the arctic front, areas of heavy lake-effect snow are expected for a time in the northern Great Lakes, with a burst of snow associated with the arctic front itself from the eastern Great Lakes into northern New England.
Vencor weather reports that an overall upper-atmosphere pattern with “high-latitude blocking” is looking increasingly likely for later this month and that could result in more cold air outbreaks for the Mid-Atlantic region by the time Thanksgiving week rolls around. This is one reason why natural gas is strong the other is the anticipation of a small injection into storage that may be the lowest of the decade for this time of year.
Oil has to also worry about the geo-political risk in Saudi Arabia. The Wall Street Journal in a must read reports that Saudi authorities have frozen the bank accounts of the kingdom’s former crown prince, Mohammed bin Nayef, the latest royal targeted in a corruption crackdown carried out by a Saudi leadership seeking to consolidate power. The Journal says that dozens of royals, current and former officials and prominent businessmen were detained over the weekend, when the government launched a sweeping corruption investigation. Those detained face allegations that include money laundering, bribery and procurement fraud. Saudi authorities have since then expanded the crackdown, carrying out new arrests every day. As of Wednesday evening, around 1,800 bank accounts had been frozen in connection with the probe, according to people familiar with the matter.
Among them are bank accounts linked to Prince Mohammed bin Nayef and to some of his close relatives, the people said. The prince was until recently one of the most influential members of the Saudi ruling family. A former minister of interior, he was a trusted U.S. ally who was known as Saudi Arabia’s counterterrorism czar for his role in helping combat al Qaeda. Stay Tuned!
Nat gas is going to be a market mover with the cold coming in! Expectations are for a +14 Bcf injection compared with a 54 Bcf injection last year and +45 Bcf injection for the five-year average. There are some that think we may actually come in well below that guess.
With the first big cold front of the year descending on the nation, is it too early to be thinking about the Money Show in Orlando in February? Absolutely not! Go to the Money Show website and get signed up before space runs out. Make sure you stay tuned to the Fox Business Network all day long to get the latest on Politics and Money! We have kept our long term bullish outlook on oil all year and now others are getting on board.
— Phil Flynn
The Price Futures Group’s mission is to provide traders and investors with industry-leading trading solutions, informative market analysis, and cutting-edge technologies which enable efficient decision-making. The Group is available answer marketing questions and meet your investment needs. Find the company online at www.pricegroup.com or call the Chicago office at (888) 264-5665.