Santa Ana Winds destroying the wine fields in Napa Valley and the destruction of life as we have seen with the destruction we have witnessed in this active hurricane season. Our prayers go out to the persons affected by these Acts of God and the First Responders giving it their all to say lives. On the Corn front yesterday’s Reuters poll showed harvest at 27% complete with 62 % rated good to excellent. While Corn harvested and condition vary from state to state and county to county and the heavy rains should slow down the harvest which should create some sort short covering. With the market not responding ahead of tomorrow’s Crop Production USDA Supply/Demand data. In the overnight electronic session the December Corn is currently trading at 347 ¾ which is 1 ½ of a cent lower. The trading range has been 349 to 347.
On the Ethanol front the November contract posted a trade at 1.424 which is .004 of a cent higher. The market is currently showing 1 bid @ 1.424 and 1 offer @ 1.429 with 2 contracts traded and declining Open Interest at 1,012 contracts. This market is poised to take off in the next few years with China importing and implementing Ethanol in their fuel standard in this emerging market and could accelerate a bullish tone and be a long-term bottom in this market and the Corn market.
On the Crude Oil front the investors in this market are slowly coming to the realization of shortages ahead. With a wide Brent Crude WTI Crude spread we should see more exports and expect OPEC to stand firm on production cuts. This is a changing of the guard of bearish sentiment. In the overnight electronic session the November Crude Oil is currently trading at 5102 which is 10 tics higher. The trading range has been 5142 to 5081. At 3:30 P.M. today we will have the weekly API Energy Stocks data which I expect further bullish news.
On the Natural Gas front the market has raised eyebrows again catching investors short when they were bulls and did not want to get fooled again. But getting caught long or short and trying to bottom feed bullish sentiment went to the wayside and bulls got caught being bears. Just when you thought it was safe to get back in the water… Bullish fundamentals in the next few years should get this market and the complex rolling. In the overnight electronic session the November Natural Gas is currently trading at 2.931 which is 4 cents higher. The trading range has been 2.946 to 2.876.
— Daniel Flynn
Try to Get Off Oil
It’s hard to break those addictions. You see abnormally low oil prices are like crack to an economy. Economies start to get hooked on cheap oil and then want more. Then they get addicted to oil and then they continue to buy at any price because once they get hooked they can’t get enough. We saw that in the bottom of the oil cycle back in 1999 and we are seeing it once again.
This period of abnormally low oil prices is raising global oil demand estimates and igniting global economic growth. The International Monetary Fund (IMF) raised forecast for projected global economic growth of 3.6 percent this year and 3.7 percent for 2018.
That rise in growth means that global oil demand growth should see another increase in demand that already has grown by at least 2.3 million barrels per day (mb/d), or 2.4 percent, in the second quarter of 2017 according to data from the International Energy Agency last month the strongest growth in two years. That growth number may be even higher as the IEA traditionally underestimates demand.
We Get the OPEC demand report soon and we expect based on comments that their demand estimates will rise. Now with OPEC set to extend production cuts the drawdown in global oil supply will continue. The cartel is reaching out to shale producers to show restraint until they can get the supply situation back in order. Yet it may not be OPEC that gets shale oil producers to show restraint as shale investors are getting smarter about where to put their money, Major players are starting to reward shale firms that can show profits and good balance sheets instead of just the ability to produce barrels. With the U.S. rig count slowing and a move towards well head profitability the shale oil players won’t be able to replace OPEC barrels and surging global demand.
We also will get the American Petroleum Institute Report tonight and we should see crude supply fall. With Brent crude trading at a huge spread to the WTI contract, why would you put it in storage if you could find a ship and deliver it overseas. U.S. production in the Gulf of Mexico is not all the way back. The BSEE reported that 58 percent of oil production is still offline or about 1.024 million barrels of oil per day. About half of natural gas production remains offline in the Gulf of Mexico.
The EIA’s International Energy Outlook 2017 (IEO2017) projects that among all regions of the world, the fastest growth in buildings energy consumption through 2040 will occur in India. In the IEO2017 Reference case, delivered energy consumption for residential and commercial buildings in India is expected to increase by an average of 2.7% per year between 2015 and 2040, more than twice the global average increase.
Most of this growth is the result of increased electricity and natural gas use (because of greater access to these energy sources) and the increased use of appliances and energy-using equipment. Despite the rapid growth in buildings energy consumption, the IEO2017 reference case shows that, among the IEO2017 regions, India’s per capita buildings energy use through 2040 is the second lowest after Africa.
— Phil Flynn
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