Energy Update: Crude To $90 Or $100?

| November 15, 2013 | 0 Comments

Oil and Nat GasThursday was a big day for the energy markets.  As you may know, the US Energy Information Administration (EIA) released both weekly oil and natural gas inventory reports yesterday due to the Veterans Day holiday on Monday.

Let’s see what these important data releases revealed about the current supply/demand situation for energy commodities…

Oil

The EIA reported a 2.6 million barrel build in crude stocks for the week of November 8th.  The rise puts total US oil inventories at 388.1 million barrels.  That’s higher than normal for this time of year and closing in on the all-time inventory high of 397.6 million barrels set in May 2013.

Take a look…

Crude Oil Inventories

Chart courtesy of Bloomberg

As you can see, oil inventories are growing rapidly now that we’re out of peak demand season. 

But here’s what’s really interesting…

For the first time in nearly two decades, the US is producing more crude than it imports from other countries.  In fact, domestic production is at a 24-year high while oil imports are at a 17-year low.

Folks, that’s a huge milestone for the US energy markets…

As long time readers know, US oil production is continuing a dramatic upswing that started in 2008.  Thanks to advances in drilling technology, explorers are unlocking vast reserves of previously unattainable energy resources.

What’s all this information mean for the price of crude?

As long as Middle East supply fears don’t enter investors’ mindset, we should see crude drop to the high $80 a barrel range by the middle of December.

Natural Gas

Thursday’s EIA natural gas storage report revealed US inventories rose by 20 billion cubic feet (bcf) for the week of November 8th.  The rise puts total inventories at 3,834 bcf, which is 2% below last year’s all-time inventory high.  However, storage levels are still 1.5% above the 5-year average.

No matter now you look at it, natural gas inventories are still robust…

But a shift in the weather will do a lot to change the oversupply situation.   In fact, the National Oceanic and Atmospheric Administration’s (NOAA) 6-10 day outlook calls for below normal temperatures for most of the Eastern US. 

As a result, natural gas storage levels should enter withdrawal this week. 

Of course, where natural gas prices go from here largely depends on the US temperature variances over the next few months.

But remember…

The Farmers Almanac is calling for one of the coldest winters in years.   The highly trusted source expects “biting cold” conditions by late December.  But more importantly, extreme cold is expected to be long lasting.

No doubt about it, a lengthy cold snap will help push natural gas prices higher this winter!

Until Next Time,

Justin Bennett

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Category: Crude Oil, Natural Gas

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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