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Daily First Look
Daily briefThomas Liardon

Crude Dips as Trump Comments Calm Fears of Immediate Escalation; Gas Heads for Weekly Gain

Crude edges lower as Trump rules out retaliation before midterms

  • WTI is prompt-month contract fell $0.56 to $90.93 Friday morning (7:30 AM CT)
  • Oil retreated after Trump said the US wouldn’t attack Iran before November midterms, easing concerns that escalation could further disrupt flows
  • Iran hasn’t showed the same restraint, as fresh tanker attacks this week have boosted risks for vessels in Hormuz
  • A rally in freight prices continues, adding substantial costs to the petroleum supply chain
    • Moving crude from the Persian Gulf to East Asia costs more than six times more now than pre-conflict
  • Conflict continues to expand regionally, with two Houthi attacks reported in Riyadh’s main airport

Hurricane Isaias pushes toward a coastline riddled with refineries and chemical plants

  • 63% of US Gulf of Mexico crude output has been temporarily shut in as the Hurricane makes landfall late Friday or early Saturday

Natural gas heads for weekly gain

  • The November Henry Hub contract is flat this morning, but up 12c so far this week, reversing losses from last week
  • Lower-48 population-weighted weather forecasts warmed overnight, with temperatures forecast to be largely above the ten-year average for the next week, before cooling into the second half of October
  • Offshore gas production is down about 1.63 Bcf/d as Hurricane Isaias approaches the gulf coast, but demand losses from power outages and cooler temperatures may offset the impacts of lost supply
    • Production typically returns quickly following hurricanes

Storage surplus continues to tighten

  • Yesterday, the EIA reported an 85 Bcf injection into storage which brings the surplus to the five-year average to 68 Bcf
  • This is the eighth consecutive week where the storage surplus has shrunk
  • Gas inventories look to start winter at a more normal level, closer to the five-year average, compared to a five-year high eight weeks ago
  • The tightening of storage balances can mostly be attributed to hotter temperatures lifting power demand over the last two months, and seasonal declines in renewable output

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