Natural gas prices broke through the psychological floor last week and retested the lower Bollinger band as mild temperatures prevailed. Healthy production also continues to play a dominant role as the winter withdrawal season is just around the corner. Over the last several weeks traders watched storage surpluses that were built up during the first half of the year shrink as warmer temperatures allowed strong power demand to eat into storage levels. Now traders focus on the final few weeks of injection season as some analysts expect the surplus to grow somewhat before the first withdrawal takes place. The latest storage report posted by the EIA stated a build of 97 BCF which brought current levels to 3.626 TCF. After this report inventory levels now sit at 300 BCF above last year and 175 BCF above the 5-year average.
Crude oil has been very strong as inventory levels remain low and volatility in the Middle East remains very high. The market did come off this week as Egypt and Qatar successfully negotiated the release of two more hostages, but it is being reported that roughly 200 hostages remain. Oil is currently sitting at a support level near $84.00 but some analysts believe all bets are off should Israel proceed with its ground invasion against Hamas. Many traders are proceeding with caution as we are one headline away from a price spike in this market.
According to Baker Hughes the total rig count rose by two rigs last week bringing the latest total to 624 rigs. Oil and gas rigs both rose by one rig. One year ago, the total rig count sat at 771 rigs.
On October 18th, the US lifted many sanctions that were placed on the Venezuelan energy sector. It is expected that the additional oil production will only be around 200,000 barrels per day as the energy sector in Venezuela experienced many years of mismanagement and underinvestment. This week’s additional graphic highlights the Venezuelan crude oil production.