Written Commentary
CRUDE OIL
October Crude Oil reached its highest level since July 31 early Monday but backed off from that level, which was where the market had reached prior to the news that weekend that an agreement to reopen the Strait of Hormuz was at hand. The rally overnight came as expectations for a re-opening of the strait continued to fade. Data from Kpler indicated that only six ships went through the strait on Monday versus a 10-day average of about 11 vessels and 130-140 ships per day prior to the war. Barclays analysts said that crude oil and refined product net exports through the s averaged 3 million barrels per day in the week ending August 7, down from 4.4 million bpd the previous week. There were 25 vessels estimated to have moved through the Bab el-Mandeb strait on the Red Sea versus a 10-day average of 24. The Houthis reportedly attacked a cargo ship in the strait today.
PRODUCTS
September ULSD approached the contract high at 4.2888 early Tuesday, while September RBOB reached its highest level since July 30, as both product markets are being compelled higher buy global tightness in support from restricted crude oil supplies and as well as reduced refining capacity in Persian Gulf and in Russia. The tight supply situation is most keenly felt in diesel, which has a less elastic demand structure than gasoline, especially during key growing seasons in the northern hemisphere.
NATURAL GAS
September Natural Gas was near unchanged early Tuesday after a gap higher rally on Monday that took it to its highest level since July 27. Record heat in the US in July has so far not made a dent in US supply, despite expectations that power demand from air conditioning usage would drive more natural gas consumption.
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