Softer Demand Worries Edge Out Limited Supply as Oil Market Stumbles

  1. OPEC+ producers holding to production cuts
  2. Global oil demand under pressure
  3. U.S. consumer price increases moderating
  4. Natural gas supply increasing.



Alan Levine, Chairman


(202) 333-5380


Programming Note: Due to the delay in the EIA data release last week, we will not have a section summarizing the Weekly Petroleum Status Report and the Weekly Natural Gas Storage Report in this week’s Energy Market Situation. The EIA will continue to collect data and will publish two weeks of official statistics on Wednesday (tomorrow) November 15 for petroleum and Thursday November 16 for natural gas.


The Matrix

Oil prices have been softening over the past few weeks. A modestly bullish opening on Monday, November 13 was not enough, however, to suggest a more bullish tone to markets as winter approaches.

Weather data continue to emphasize the impact of this year’s El Nino (see our natural gas commentary) on below-normal HDD development. Beyond that, there appears to have been a shift among analysts toward demand destruction for the rest of this year and into 2024. Heretofore, the conflict between Hamas and Israel had raised concerns about crude oil availability. These fears appear to be easing.

Several producing interests have endorsed production constraints in the Middle East, but these are largely continuations of established doctrine, not new initiatives.

One exception might be Iraq’s new support for further limitations by OPEC+ as a meeting of the group is set during the next few weeks. Both Saudi Arabia and Russia have affirmed their expectations to keep current output below quota this year.


Bullish supply news in the United States did not create a positive stir. The number of oil rigs operating fell for the second week in a row according to Baker Hughes oil services. This brought us to our lowest level since January 2022.

Global demand may now be faltering. Chinese refiners have reportedly requested less supply from Saudi Arabia in December. And in the UK, the economy did not grow during the third quarter.

On the bullish side of the ledger, U.S. consumer prices remained unchanged in the most recent data release with the annual increase in underlying inflation the smallest in two years.  Market participants now view it likely that the Federal Reserve’s interest rate raising campaign is concluded.  The belief that the Fed may be finished hiking rates led to a sharp drop in the U.S. dollar index.  A cheaper greenback gives more purchasing power to non-U.S. buyers of petroleum.


Natural Gas

EIA announced the delay of data releases from November 8-10 to complete a planned systems upgrade. Storage data for the week ended November 8, 2023, will not be immediately available for analysis.

Data on the national supply and demand of natural gas were still published for the week ended November 8. Natural gas supply rose 1.7 Bcf during the report week.  Demand for the week, however, fell. Heating Degree Day generation has failed to match normal in almost every region of the United States cumulatively since July 1, 2022. The country has produced 94 HDDs, fewer than normal.  And in the population-rich Northeast, the data are especially lean.

New England trailed normal by 195 HDDs and the Middle Atlantic states lagged normal by 141 HDDs. This reflects the influence of the El Nino weather pattern now in effect.

Power generation fell dramatically, according to the EIA. Natural gas used for generating power declined by 7.4% for the report week. Elsewhere in the economy, demand in the industrial sector fell by 1.1%. Consumption by residential and commercial users fell, too, losing 7.6% (1.8 Bcf/d) during the week.

This week’s pricing began on an up note but not sufficiently strong enough to suggest a reversal. The MACD indicator is not oversold. Stochastics, a momentum indicator, has just touched oversold territory. Without confirmation, it is not yet time to assume a trend reversal.

Support for spot natural gas futures can be found at $2.99 and then $2.86.  A move above $3.471, basis the front-month contract, must be seen before a new bullish market phase can be considered.


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