Written Commentary
CRUDE OIL
October Crude Oil extended Monday’s rally early Tuesday and was close to filling a gap left over from the open on July 27. The lack of negotiations towards reopening the Strait of Hormuz, with both Iran and the US upping their rhetoric on Monday, and the end of the official cease fire from the Memorandum of Understanding from June has elevated concerns about supply. There were reports from Axios and Fox news on Monday that President Trump had opened back-channel discussions with the Islamic Revolutionary Guard Corps. In an escalation of rhetoric, a representative of the Iranian regime said the nation was shifting from a defensive to “fully offensive” mode and that Iranian entities must be prepared to escalate tensions in the Strait of Hormuz and a wider region. Current flows through the strait are minimal, with six commodity ships moving through on Monday versus a 10-day average of 11 ships, according to data from Kpler.
PRODUCTS
Product prices are pushing near or above contract highs as global supplies remain very tight. Reuters reports that at least one cargo of gasoline from India has into entered Russia’s domestic market, as Russia seeks to ease its tight supplies and as was indicated from statement by the Russian oil minister in July.
NATURAL GAS
October Natural Gas higher early Tuesday as the market seemed to reject its lower move on Monday that avoided a test of the August 7 low at 2.668. US output remains strong, with LSEG putting lower 48 states production at 111.6 billion cubic feet per day (bcfd) so far in August, up from a record 110.7 bcfd in July. The latest 6-10 and 8-14 day forecast is a little cooler than yesterday, with more normal and below normal temperatures moving in over the northeastern quadrant of the lower 48. Above normal temperatures predominate, but that has done little to ease ample supplies.
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