The November NYMEX contract tested the psychological $3.00 level this week as traders focus on the upcoming winter season and the shrinking storage surplus. The $3.00 hurdle proved to be too much for the bulls to surpass this time as strong production and several more upcoming storage injections played as factors. The prompt contract has not closed above $3.00 since March 3rd.
The latest storage report from the EIA stated an injection of 90 BCF which brings current inventory levels to 3.359 TCF. That level is 397 BCF above last year and 189 BCF above the 5-year average.
Crude oil traded back down below $90.00 this week despite former House Speaker Kevin McCarthy averting a government shutdown by cutting a deal with Democrats in the House. US manufacturing data for September contracted for the eleventh month in a row applying bearish pressure to the crude market. OPEC also continues to be a wildcard as they state no plans to increase production despite Iranian and Nigerian output increasing by 120,000 barrels per day in September. It is not uncommon for some members of the cartel to cheat production figures for economic reasons.
The latest rig count produced by Baker Hughes showed a net drop of seven rigs last week bringing the total rig count to 623 rigs. Oil rigs dropped by five as gas rigs fell by two. One year ago, the rig count sat at 765 rigs. Some analysts believe that a lower rig count is evidence of an underinvestment in the crude commodity complex.
This week’s additional graphic from Platts depicts the storage surplus and the Henry Hub cash price over the last year. This fundamental has been the backbone of the natural gas market and a key focus for traders as we approach the winter.