Written Commentary
CRUDE OIL
June Crude Oil was back near unchanged this morning after starting out a bit higher off reports of renewed attacks between the US and Iran in the Persian Gulf. On Thursday a senior Iranian official said Iran would not allow the US to reopen the Strait of Hormuz with “an unrealistic plan” and then exit the war without paying any reparations. Iran’s military also said the US targeted two ships entering the Strait of Hormuz and carried out strikes on Iranian territory. The U.S. military said it fired in response to Iranian attacks. The UAE also said it intercepted missiles and drones from Iran. President Trump told reports that cease fire was still in effect. US Energy Secretary Chris Wright said on Thursday that Iran appears to have cut back oil production by 400,000 barrels per day and is likely to reduce it further as its storage units fill. Reuters reported that industry sources and shipping data indicate that the UAE and buyers have recently sailed several tankers loaded with crude through the Strait of Hormuz, but this only represents a fraction of the amount that was moving through the strait prior to the war.
PRODUCTS
Product prices are near unchanged this morning as the markets assess the possibility that an agreement will be reached to reopen the Strait of Hormuz. US gasoline are distillates stocks are below year-ago and five-year average levels.
NATURAL GAS
July Natural Gas avoided a test of the April 30 lows this week, perhaps because US production seems to be slowing in reaction to low prices, which may east the seasonal supply build. Yesterday’s weekly EIA report came in below expectations for a change, with storage for the week ending May 1 at 2,205 billion cubic feet +63 bcf from the previous week versus an average trade expectation of +74 and a range of +63 to +84. The five-year average change for this week is +81. Storage was +2.8% from a year ago and +5.4% above the five-year average versus +4.9% and +6.5% the previous week. LSEG said on Thursday that average gas output in the US lower 48 states is running around 109.1 billion cubic feet per day so far this month, down from 109.5 bcfd in April and the record high 110.6 bcfd in December. The 6-10 and 8-14 day maps show above normal temperatures across most of the lower 48, which may provide a boost in cooling demand in southern states. This is a mixed bag, as the warm temps will also limit late season heating demand in the north.
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