Written Commentary
CRUDE OIL
August Crude Oil was slightly lower early Monday but was holding Thursday’s low. The market approached but did not enter the gap from at 66.96-65.70 that the market made at the start of the Iran/US war at the beginning of March. Prices were under pressure today on the news that OPEC+ agreed on Sunday to increase output targets by another 188,000 barrels per day in August. This follows similar increases for June and July. Oil exports out of the Persian Gulf were estimated at 10 million barrels per day in June, up 3 million bpd from May but 40% below pre-war levels. Gulf oil producers are reportedly offering crude at steep discounts on the spot market as competition heats up. On the other hand, the need to refill strategic reserves and supplies in importing nations could provide support to prices in the months ahead.
NATURAL GAS
August Natural Gas continues to chop around inside a two-month consolidation range, as the trade wonders if the recent hot weather will boost demand enough to draw down US supply, which has been kept high by the predominantly mild pattern last winter and this spring. The recent heat wave may be abating, but the 6-10 and 8-14 day forecasts show above normal temperatures covering most if not all of the lower 48-states. Thursday’s EIA gas storage report showed a net injection of 87 bcf for the week ending June 26, which was above the average trade expectation of +81 but within the range of expectations from +57 to +90. The five-year average change for this week is +60. Storage was -1.0% from a year ago and +5.6% above the five-year average versus -2.2% and +4.7% the previous week, making it slightly more burdensome relative to the average than the prior week. The storage gain was the highest for this point in the season in six years. India has withdrawn an order imposing curbs on gas suppliers as supply of liquefied natural gas has resumed from the Middle East.
PRODUCTS
Product prices were higher early Monday, especially gasoline which broke through last week’s highs. Crude Oil may be moving through the Strait of Hormuz, but it will take some time for that to be refined into gasoline or diesel. US product exports have increased sharply since the closure of the strait, and US product supplies have been drawn down. Gasoline stocks at 214.0 million barrels are the lowest for this point in the season in at least six years. Distillate stocks at 108.6 million are up off their lows from May and have moved above year ago levels, but they are still the second lowest for this point in the season in at least six years.
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