Written Commentary
NATURAL GAS
August Natural Gas was sharply lower early Thursday as the market continued its choppy action of the past two months. Hot US weather should help support cooling demand, but US supplies are ample and production continues to be strong. For the EIA storage report today, a Reuters poll of analysts has an average expectation for a net injection of 49 bcf for the week ending July 3, with range of expectations of +44 to +55. The five-year average change for the week is +51 bcf. As of June 26, storage was -1.0% from a year prior and +5.6% above the five-year average. LSEG said average gas output in the lower 48 states is running around 109.4 billion cubic feet per day (bcfd) so far in July, down from 110.0 bcfd in June and 110.6 bcfd in December. Average gas flows to the nine big US LNG export plants are averaging 17.8 bcfd so far this month, up from 17.4 bcfd in June but below the record 18.8 bcfd in April. The 6-10 and 8-14 day forecasts still show above normal temps across the lower 48 but not as widespread as they were previously.
CRUDE OIL
September Crude Oil was near unchanged early Thursday has was confined to Wednesday’s range up action. The market rallied Tuesday off the resumption of hostilities in the Persian Gulf, but the move was rather restrained considering the actions threaten to stop flows through the Strait of Hormuz. Trump at one point was threatening Iran’s Kharg Island, which would seem to be an ultimate threat, but that could have been just rhetoric. The path to peace was never going to be smooth; Iran and US have conflicting goals. Iran seems to be testing the US over its desire to control the Strait of Hormuz, and the US has responded. Will Iran adjust its approach, or will the hardliners win out? Reuters reports that war underwriters have advised shipping companies to pause voyages through the strait, while others are reviewing their policy terms after renewed vessel attacks threatened a return to war, insurance industry sources said on Wednesday.
PRODUCTS
Product markets are supported by tight global supplies that will take longer to replenish than crude oil. The US has been the supplier of last resort through this crises, which is reflected in the tight stock levels. Adding insult to injury, Russia has banned diesel exports to support its domestic market after Ukrainian drone attacks on refineries caused fuel shortages and price spikes.
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