Written Commentary
CRUDE OIL
The crude oil market survived what should have been a bearish US jobs report on Friday that showed the economy added 272,000 jobs in May, beating the top end of the highest guesses. Unemployment rose to 4%, the highest in two years. This strong jobs gain pushed back expectations for a Fed rate cut, perhaps into 2025 and supported a bullish reversal in the dollar that extended overnight. A report from Goldman Sachs said they expect strong summer transportation demand to push the oil market to a deficit of 1.3 million barrels per day in the third quarter. Recall the EIA crude and gasoline stocks rose last week but that US crude stocks are below a year ago and the five-year average. The market staged a mild recovery in the second half of last week after the selloff in the wake of the OPEC+ meeting, in which it was suggested that voluntary cuts of 2.2 million barrels per day could be phased out beginning in October. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 49,087 contracts of crude oil for the week ending June 4, reducing their net long to 152,342, which is neither overbought nor oversold.
NATURAL GAS
An extended heatwave across forecast for much of the lower 48 states of the US is supporting a rally in natural gas. After a couple of days of cooler weather this week, the eastern half of the US is expected to heat up. The 6-10- and 8-14-day forecasts call for much above normal temperatures across the eastern half of the US and into the southern Plains, with above normal extending into the west but moderating to normal to below normal in the northwest. LSEG said output in the lower 48 states has slipped to an average of 98.0 bcf per day so far this month, down from 98.1 in May. They look for demand to fall to 93.3 bcf per day this week from 94 last week but climb to 99.2 in a couple of weeks as the hot weather takes hold. China’s natural gas consumption for January-April totaled 143.73 billion cubic meters, up 11.9% from the same period a year ago, according to the National Development and Reform Commission. They produced 83 bcm domestically (up 5% from year-ago) and imported 43 million (up 20.7%). Last week’s US EIA Natural Gas storage report showed total gas in storage as of May 31 was 2,893 bcf, up from 2,520 a year ago and above the five-year average of 2,312. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 26,017 contracts of natural gas for the week ending June 4, reducing their net long to 16,847. This is close to a neutral position and leaves room for fund buying if they get interested.
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