Energy Prospectus

It has been a wild week for oil prices. With all the risk to supply, the volatility will continue. There is an incredible amount of "noise" impacting the oil price recently. U.S. and OECD petroleum inventories are below normal for this time of year.

Trading Economic at 12:30 ET
WTI
WTI crude oil futures traded around $75.5 per barrel on Friday, poised to book its second weekly gain, driven by increasing risks of supply disruptions. < My Q4 forecasts are based on WTI averaging $70/bbl during the quarter, but IMO the "Right Prices" is within the trading range that began in mid-2022 of $75 to $85.
> Israel’s Prime Minister Benjamin Netanyahu’s security cabinet met on Thursday to discuss the timing and response to Iran's recent missile attack, keeping markets on edge over potential retaliatory strikes on Iran's oil industry.
> Additionally, disruptions from Hurricane Milton further supported prices, as nearly a quarter of gas stations in Florida ran out of fuel, and 3.4 million homes and businesses lost power. < Higher demand for transportation fuels and lower demand for natural gas.
> On the demand side, the outlook improved after top crude importer China unveiled a draft law to promote private sector growth, aiming to boost investor confidence amid an economic slowdown.
> Meanwhile, traders are assessing recent US data for clues on the Federal Reserve’s policy outlook, with inflation coming in higher than expected and a rise in jobless claims.

Natural Gas
The NOV24 NYMEX futures contract for US natural gas futures fell to $2.63/MMBtu, extending its decline from the over-three-month-high of $3 as evidence of strong supply magnified the lower demand brought by hurricanes in the US Southeast.
> New data from the EIA showed that natural gas storages in the lower 48 states soared by 82 billion cubic feet on the week ending October 4th, the most since March, and sharply above market expectations of a 71 billion cubic feet increase. < 14 Bcf below the 5-year average build for the week. Remember that the larges storage builds of the year are from mid-September to mid-October.
> Bearish pressure was also owed to the fallout of Hurricane Milton in Florida’s Gulf Coast, which prompted houses to cut off their electricity and reduce power demand from gas generators. The developments added to similar developments previously following Hurricane Helene.

Houthi Havoc: Oil Flows Shift as Ships Avoid Red Sea
By Julianne Geiger - Oct 11, 2024, 11:00 AM CDT
https://oilprice.com/Energy/Energy-General/Houthi-Havoc-Oil-Flows-Shift-as-Ships-Avoid-Red-Sea.html

Oil Prices Under Pressure Despite Major Upside Risk
By Michael Kern - Oct 11, 2024, 8:23 AM CDT
https://oilprice.com/Energy/Energy-General/Oil-Prices-Under-Pressure-Despite-Major-Upside-Risk.html

EIA's Short Term Energy Outlook dated October 8, 2024

Crude oil prices. We reduced our forecast for the Brent crude oil spot price through the end of next year. In this month’s outlook, we expect the Brent price will average $78 per barrel (b) in 2025, $7/b less than we expected in last month’s STEO. In our forecast, lower crude oil prices largely reflect a reduction for global oil demand growth in 2025. Although we reduced our crude oil price forecast, crude oil prices have risen in recent days because of escalating conflict in the Middle East, raising the possibility of oil supply disruptions and further crude oil price increases.

Petroleum product price. Lower crude oil prices reduce our forecast prices for most petroleum products. The largest change from our last forecast is for propane. We forecast the Mont Belvieu propane spot price will average 72 cents per gallon (gal) in 2025, down 15% from our forecast of 84 cents/gal last month. For other products, we now expect the retail diesel price will average about $3.50/gal next year, down by 5% from last month’s forecast. We expect the U.S. average retail gasoline price will average $3.20/gal next year, down 2% from last month.

Natural gas prices. The Henry Hub natural gas spot price rose by 15% to $2.28 per million British thermal units (MMBtu) in September. We expect the Henry Hub price to continue rising to around $2.80/MMBtu in the fourth quarter of 2024 and to further increase to around $3.10/MMBtu on average in 2025 as liquefied natural gas exports, a component of total natural gas demand, increase with the addition of capacity. < My opinion is that strong demand for U.S. LNG and a normal winter will cause HH natural gas prices to average $3.50 in 2025. A colder than normal winter in the Northeast U.S. region, which burns a lot of natural gas for space heating, could push U.S. and Canadian natural gas prices much higher. A repeat of the Bidding War we saw in August 2022 to over $9.00/MMBtu is possible.