Crude Slips as Traders Weigh Gulf and Russian Supply Risks; Gas Inches Lower as Shoulder Season Forecasts Mild

Crude slips as traders weigh Gulf and Russian supply risks

• The WTI prompt-month contract fell $1.65 to $92.09/Bbl Tuesday morning (7:30 AM CT)
• The latest UKMTO reports indicate that 23 maritime security incidents have been registered so far in October
• Meanwhile, Bloomberg reported that at least 10 empty VLCCs and several Suezmax tankers approaching Fujairah in the UAE have stopped or reversed course
• • Fujairah and the Gulf of Oman serve as critical transfer hubs for crude exported from the Persian Gulf
  • Smaller shuttle tankers carry crude through Hormuz before transferring the cargo to larger VLCCs waiting outside the strait
• If attacks continue to deter larger tankers from approaching the region, receiving capacity could decline and limit exports even if shuttle vessels continue moving crude through Hormuz
• Gulf producers are also working to expand export capacity outside Hormuz, with Saudi Arabia considering the temporary conversion of a domestic gas pipeline to carry crude
• • The conversion could add 1.2 MMBbl/d of pipeline capacity toward the Red Sea within seven to eight weeks
• Russian Deputy Prime Minister Alexander Novak said the country could increase diesel exports to between 3.0 and 3.5 million metric tons per month by year-end
• • That would return exports to levels recorded before extensive Ukrainian attacks disrupted Russian refining capacity, although Novak’s projection remains uncertain
• Russia struck six Ukrainian energy facilities on Monday despite the “energy ceasefire” announced by President Donald Trump

Gas inches lower as shoulder season forecasts mild

• Natural gas is down -0.8c to $3.159/MMBtu (As of 07:30 AM CDT)
• L48 dry gas production slipped 1.6 Bcf/d overnight to 109 Bcf/d, a new two-week low (Criterion)
• Forecasted L48 temperature changes were mixed this morning, with some warming in the Midwest and South Central regions more than offsetting temperature losses in the Rockies
• • The L48 gained 6.5°F overall, which is associated with a 7.5 Bcf loss of weather driven demand
  • L48 average temperatures were expected to show a continual decline into the low 60s/ high 50s over the next two storage weeks last Friday, but models have since reversed higher, showing an uptick in temperatures in the last week of October back to 62.5°F

LNG feedgas demand eclipses 20 Bcf/d

• If early noms can hold and stay consistent over the following weeks, the US could return to and surpass the all-time highs in domestic LNG feedgas demand
• The drive higher is due to Cove Point’s return, which added back 804 MMcf/d, and Freeport Train 2 coming back online, with noms starting to settle higher after a week of reduction