The natural gas market was edging higher on colder weather forecasts but was thwarted by a historic announcement. The Energy Information Administration gave pause to natural gas bulls when it reported that U.S. gross natural gas production hit a record high 73.54 billion cubic feet a day in October. That was up 0.4% from the month of September that was also upwardly revised and more than the market expected. Now, when you couple that with the fact that more pipelines are coming online to get that increased gas production into Henry Hub, the longer-term expectations for end of season storage has to start rising. So in other words it will be hard to keep gas strong as it is clear that production is on an upward trajectory despite the weakness in price.
The colder temperatures did support oil that was being weighed down by an anticipated rebound in supply. Heating oil led the way and RBOB received support by reports of a Bayway Flaring incident. The market was also moved by stock market gyrations, which mean that earnings could impact the price of oil. Technically crude still looks to move higher. Of course the “gas-oil” and natural gas market seems to be the strongest as cold weather in Europe and China are supporting prices. Reuters reports that British gas for immediate delivery rose to a near two-week high on Monday morning as forecasts of cold weather and rising industrial consumption after the extended holiday period boosted demand outlooks.
Daily average temperatures were expected to drop to below 2 degrees Celsius by early next week, down from around 10 degrees Celsius forecast for Tuesday. Cooler weather was expected to boost gas-fired heating demand.
In Asia, distillate and jet fuel margins are at one-week highs as kerosene demand from Japan continued to be strong on a colder than anticipated winter. Still the gasoil market, on the other hand, has been adequately supplied with more spot barrels seen coming out from India and Taiwan.