Energy Prices Pressured Despite High Upside Risk

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Energy prices were mixed amid Hurricane Milton repercussions and uncertain demand from China.

Crude Oil

September net imports fell -13.5% y/y on lower domestic demand
  • WTI crude futures dipped by 0.3% to settle at $75.6 as investors considered the potential supply disruptions from the Middle East conflict and the effects of Hurricane Milton on fuel demand in Florida.
  • Still, the US benchmark marked its second consecutive weekly gain, and it has surged over 10% since Iran’s missile attack on Israel.
  • 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.
  • The return of Libyan oil exports is also driving down crude prices in the North Sea and Mediterranean, as local refiners reduce purchases of non-regional crudes.

Gasoline

Q3 2024 net exports fell over -6% y/y amid China demand concerns
  • Gasoline futures in the US fell to $2.05 per gallon from the over one-month high of $2.15 as crude oil supply concerns eased for refineries.
  • Data from the EIA showed that crude oil stocks surged by nearly 6 million barrels on the week ending October 4th, nearly three times the expected build.
  • The pullback for futures was also owed to skepticism that the Chinese fiscal stimulus signaled by Beijing would be enough to lift fuel demand.
  • Lower energy demand in China was the culprit for the EIA to downwardly revise its global oil demand forecast this year by 300k bpd to 1.2 million bpd.

Natural Gas

Inventory build exceeds expectations, Hurricane Milton disrupts demand
  • US natural gas futures fell to $2.66/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 storage soared by 82Bcf on the week ending October 4th, the most since March, and sharply above market expectations of a 71 Bcf increase.
  • Bearish pressure also came from 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.
  • Production levels also stayed low, with output estimated at 101.2 Bcf/d as companies reduced activity in response to weak prices.