Written Commentary
CRUDE OIL
A report that OPEC+ is considering another large hike in production for July, similar the 411,000 barrels per day increases the group made in May and June, sent crude oil prices lower overnight. This adds further evidence that OPEC, namely Saudi Arabia, are willing to go after market share at the risk of lower prices. The group plans to meet on June 1. The overnight selloff came on the heels of a reversal lower yesterday from seven week highs on a move that culminated with reports that Israel was planning a strike on Iranian nuclear facilities. A strike would certainly raise tensions in the Middle East, but there seems to be enough spare capacity around to make up for any loss of Iranian supply. The EIA report did not help, with US crude oil stocks showing an increase of 1.3 million barrels last week after the trade was looking for a 1.3 million barrel decline. Crude stocks in Cushing, OK fell for the third straight week, and they are the lowest for this point in the season in at least six years.
PRODUCTS
Product prices are lower this morning in line with crude oil on the expectations for another sharp increase in OPEC+ crude production for July. The EIA stocks report yesterday came at the bearish end of expectations for RBOB and ULSD. Implied gasoline demand was also the lowest for this point in the season since Covid.
NATURAL GAS
After a two day bounce, July Natural Gas is slightly lower this morning. For the EIA gas storage report today, the Reuters poll has an average expectation calling for a net injection of 115 bcf last week, with a range of expectations of +106 to +130. The five year average change for the week is +83 bcf. Last week’s report showed storage was -14.6% from a year ago and 1.9% above the five-year average, and if today’s number comes in as expected, it would put storage down 12.8% from a year ago and 3.2% above the five year average. Gas demand is expected to decline again next week as we move further into the shoulder season, before the summer cooling demand really starts to kicks in.
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