Written Commentary
NATURAL GAS
Natural gas was higher for the third straight session early Friday as the market attempted to put some distance from Wednesday’s four year low for the September contract and a three-month low on the nearby chart. The market drew some support on Thursday from the weekly EIA Gas storage report, which showed US gas in storage +28 bcf for the week ending July 24 versus +35 expected (range +24 to +42). The five-year average change for this week is +31. Storage was down -0.2% from a year ago and 6.0% above the five-year average. Hotter-than-normal weather is expected to persist through August 14, with the 6-10 and 8-14 day maps showing above normal temperatures across almost the entire lower 48 states, which should at least help boost cooling demand.
CRUDE OIL
September Crude Oil saw choppy action so far today as the market tries to weigh reports of ships managing to exit the Red Sea and Persian Gulf against worries about escalation in the hostilities between Iran and the US. No new attacks were reported overnight, but the drone strike on Egypt’s Damietta Port this week was viewed as a major escalation of the war, as this was the first time that Egypt was targeted. No entity has claimed responsibility for the attack. Iranian Foreign Minister Abbas Araghchi seemed to suggest (obliquely) that it may have been as Israeli “false-flag” operation. However, Iran has threatened to stop all Middle Eastern energy exports, saying that no oil should flow from the region while the United States blockades Iranian tankers. Also, the have demonstrated that the canal zone is within the range of their drones and rockets.
PRODUCTS
Price action was mixed overnight as diesel prices found support from very tight global supplies not only from the reduced availability of crude from the Mideast but also from the lack of availability of refined products from Russia. September RBOB fell to its lowest level since July 15 and was pulled off its lows by rallies in diesel and crude oil. Reports of a Ukrainian drone attack on a Lukoil facility overnight makes the chance a recovery in Russian diesel output appear even more remote.
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