Oil: Close at $49.05bbl for Brent ICE (This morning at $ 48.47/bbl) 

Crude prices posted huge gain yesterday in the best session in three weeks. With +$2.24/b and +2.74/b gains for both Benchmark, both Brent and WTI are now back to their levels of Mid October. Brent gets closer to $49/b while WTI now trades back above $45.5/b. Yesterday markets were on the edge of the cliff but they finally decided not to jump, finding some support (where? I don’t know) to rebound strongly: it was obviously not the good timing to sink back down to below $45/b for Brent but beware next time, markets will maybe not find enough resources to do so twice… Indeed, all signals sent to markets were rather bearish yesterday : the EIA report showed rising stocks and increasing production while the Fed issued very hawkish, more than expected, strengthening the greenback (see daily eco).

Main events:

– As expected, the EIA report for week ending 16 October confirmed the current bearish tone and showed rising crude stocks and declining products stocks, a typical pattern of maintenance season period. US commercial crude stocks rose +3.4 Mb, perfectly in line with expectations. Refinery run rate (+1.2% to 87.6%) rose, showing that we are now heading to the end of the maintenance season. Products inventories dropped -7.1 Mb, mostly driven by distillates (-3 Mb) and gasoline (-1.1 Mb) once again.

Surprisingly, US crude production showed a rebound after a flat trend the week before. US produced +16 kbd more this week and US output is now estimated at 9.1 Mbd, the average of the last five weeks.

– The US Federal Reserve kept interest rates unchanged yesterday and made a direct reference to its next policy meeting in December about a rate hike. It was quite a surprise and the statement had a double negative impact on crude markets. First, the dollar strengthened making it costlier for countries owning other currencies to buy crude and it also decrease appetite for risky assets such as crude.

– Almost two months before the expected lifting of international sanctions, Iran total oil loading hits 7-month low in October to 1.07 Mbd, according to shipping sources (REUTERS). Condensate represent a quarters while crude accounts for the three quarters of these volumes. Top buyer China is loading about 400 kbd of crude and condensate. Others are India (170 kbd), South Korea (120 kbd), Japan (155 kbd), Turkey and UEA (100 kbd). The consensus remains around +400-600 kbd for Iran within a year.


Today we expect a slight correction after the huge gain of yesterday and there is a strong support zone around $48.5/b. A better than expected US GDP this afternoon could cap losses after 1:30 pm.  

Gas: Close at 18.09EUR /MWh for TTF CAL 16 (This morning at 18.18EUR /MWh) 

Expectations of a cut in Norwegian supply due to planned maintenance work on Thursday provided some support to NBP spot prices on Wednesday. Nevertheless, the UK system remained well-supplied yesterday despite an increase in gas demand for exports through the Interconnector pipeline. On the continent, spot prices were flat day-on-day as fundamentals remained roughly unchanged. Mild weather conditions continued to dampen gas demand for heating across Europe: British residential demand was 15% below seasonal norms on Wednesday. 

On the curve, contracts opened below Tuesday’s close and were on track to hit new record lows. But a $2.2/bbl jump in Brent prices pushed curve contracts higher in the afternoon although gains remained limited on the back of a comfortable fundamental picture. A downward move of the pound against the euro provided additional support to the British curve. NBP ICE November 2015 prices gained 0.03 p/th at the close (+0.08%), to 39.36 p/th. TTF ICE November 2015 prices were also slightly higher at the close: +3.5 euro cents (+0.19%), to €18.125/MWh. TTF ICE Cal 2016 prices were almost unchanged at the close: +1 euro cents (+0.07%), to €18.086/MWh. 

Despite an ongoing planned outage with a 30 mm cm/day impact, Norwegian exports to the continent are unchanged this morning while Langeled flows dropped by only 10 mm cm/day, which could exert some bearish pressure on prompt contracts today. Nevertheless, a downward revision in temperature forecasts for next week on the continent could be supportive for near-curve maturities. Note that this is the last day of trading for ICE November 2015 contracts. On the far-curve, a drop of the euro against the pound after the Fed meeting yesterday evening (see Eco & Oil Price Analysis for further details) could support TTF contracts whereas it may weigh on the NBP curve today.