Happy Thanksgiving Eve! One hundred and forty-eight years to the day after Alfred Nobel patented dynamite, and the fuse has been lit for an explosion to the downside for the crude complex.
After geopolitical tension was stoked yesterday, attention shifts back to oversupply today with the weekly EIA inventory report. Yesterday afternoon’s API report yielded a build of 2.6 million barrels to crude stocks, as well as solid builds to the products. This has adjusted expectations ahead of the EIA report, as a lesser 1 million barrel build was being baked into the cake.
Yesterday we discussed how copper is at a six-and-a-half year low due to a combination of falling Chinese demand and a rising US dollar. The chart below illustrates that despite the downward trend in copper prices, an ongoing supply glut is set to persist, as lower-cost projects come to fruition after billions of dollars have already been invested. Accordingly, global copper production is expected to reach an all-time this year…and is projected to rise through the rest of the decade.
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Given the broad-based sell-off we have seen in commodities, from copper to crude to coal, Bloomberg’s commodity index – which tracks 22 natural resources – has plunged two-thirds lower from its peak in 2008 to the lowest level since 1999:
Today is ‘double data day‘, as tomorrow’s Thanksgiving holiday means we get the EIA natural gas storage report a day early. A minor injection of +6 Bcf is expected, which will further add to the record storage level of 4.000 Tcf. Related: U.S Drillers’ Operating Loses Could Surge In 2016
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It is unusual for us to see an injection so late in the year – as typified by the five-year average for this week of -36 Bcf – but given above-normal temperatures last week and ongoing elevated production, strong supply and weak demand remain a constant for the good ship natty. Above-normal conditions are set to persist for the first week of December, as illustrated by the 8-14 day outlook, set to stymie heating demand in the coming weeks.
In terms of economic data flow, global releases have been fairly sparse, with a few minor releases out of Europe. French consumer confidence came in a little better than expected, while Italian retail sales were in line, up 1.5% on the prior month.
The US is more than making up for the dearth of data elsewhere with a veritable feast of prints ahead of the holiday. Durable goods data was better than expected across the board, while weekly jobless claims came in at a 4-week low of 260,000, down 12,000 from last week, and much better than the consensus of 270,000 (but likely muddied by seasonality). Home sales and University of Michigan sentiment data are still to come later this morn, before the main event of the EIA releases.
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By Matt Smith
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