Written Commentary
CRUDE OIL
Despite previous forecasts that the Strait of Hormuz would take months to return to normal flow, the magnitude of the flow has surprised the trade and the “anticipated” return of Iranian oil certainly adds to the developing bearish supply storyline. While the market could see minimal support from yesterday’s weekly decline in API crude oil inventories, the decline was minimal at 765,000 barrels and the real test of the impact of reduced Middle East supply fear will be upcoming EIA weekly inventory readings. However, the recent reopening of the Strait of Hormuz is unlikely to have an impact on US export data (because of data lag) and therefore US crude oil inventories are likely to represent past conditions, and not forward prospects for a couple weeks.
PRODUCTS
While September gasoline has not failed at recent and critical consolidation low support of $2.6825 like crude oil, bullish sentiment has been severely punctured by the magnitude of ongoing declines in crude oil prices and entrenching optimism on the end of the geopolitical crises. However, as indicated in crude oil coverage, gasoline inventories have arrested a sharp decline from early February with several weeks of steady inventories and seasonal action signals an inventory rebuilding window is ahead.
NATURAL GAS
Given the lack of downside correlation with the petroleum markets over the last several months, the natural gas market does not appear to be buying into the idea that the opening of the Strait of Hormuz will begin to remove global LNG tightness concerns. However, despite lingering psychological supply fears, US inventory levels remain 5.8% above five-year average storage levels and that is considered a robust surplus.
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