Oil and Gas Markets Navigate Supply and Shipping Risks

U.S. crude oil fundamentals are facing mixed signals. While Gulf supply levels have rebounded to 16.3 million barrels per day in September, 91% of pre-war levels, mostly driven by Saudi Arabia, refined product inventories remain tight. The latest EIA report shows U.S. distillate stocks falling to 105.2 million barrels, a drop of over 2 million from the previous week. Meanwhile, overall crude and product inventories saw modest gains.

The oil market's primary concern has shifted from supply to shipping risks, particularly for Russian oil shipments via the Baltic Sea. Rising tensions around the Strait of Hormuz have led to increased attacks on tankers, driving up shipping and insurance costs. Despite these risks, OPEC forecasts crude oil production to average 28.70 million barrels per day in November, up slightly from October's 28.63 million barrels per day. The G7 has agreed to release 100 million barrels from strategic petroleum reserves as a temporary measure, while OPEC+ will maintain November production targets.

Natural gas fundamentals are supported by strong export demand, particularly for LNG, even as the domestic market remains stable. Freeport LNG is recovering from maintenance and is expected to restore feedgas intake to 1.9 Bcf/d, allowing liquefaction feedgas to two trains. U.S. LNG exports increased to 10.9 million tons in September, with Europe accounting for 54% of exports, helping to support prices.

Technically, natural gas is trading at $3.08, reclaiming the $3.00 level after a recent dip to $2.95. The first resistance is seen at $3.10, with support at $3.00. The RSI has moved from oversold to neutral, suggesting a bullish outlook as long as prices stay above $3.00. WTI crude oil is testing $88.54 support, with resistance at $92.90. Brent crude is holding at $98.71, with a key breakout test at $103.89.