Written Commentary
CRUDE OIL
August Crude oil was higher overnight despite a bearish API result that showed US crude oil stocks up 680,000 barrels during the week ended June 27 versus a Reuters poll calling for a decline of 1.8 million. Gasoline stocks were up 1.9 million versus -200,000 expected. Distillate stocks were the lone bullish entry, with a decline of 3.5 million barrels versus expectations of -1.0 million. The EIA will present their updates later this morning, and in addition to the expectations shown above, refinery runs are expected to be +0.4% to 95.1%. The budget passed by the Senate yesterday cut the amount of money available to replenish the Strategic Petroleum Reserve to $171 million from $1.3 billion, which means that less crude could be pulled from market supply over the course of the next several months. OPEC+ is expected to lift another 411,000 bpd from their quota restrictions in August, as they did for May, June, and July. According to Reuters, Kazakhstan’s oil output was back near all-time highs last month after a temporary setback. Other OPEC+ countries have been angered by Kazakhstan’s persistent flouting of their quotas, and this was a factor in the decision by OPEC+ to aggressively lift its quotas.
NATURAL GAS
August Natural Gas is higher this morning after bouncing off a six-month low yesterday. The weather forecasts continue to show a warmer bias for the lower 48 states, but not for a heat dome that would boost cooling demand significantly above normal levels. However, record heat Europe does have the potential for a limited increase in export demand for LNG, even if air conditioning is not as widespread there as in the US. Europe’s storage levels are down from year ago levels, with S&P Global data indicating they were 56.8% full at the end of June versus 75.5% a year ago, and this could keep European buying at elevated levels.
PRODUCTS
August ULSD was higher overnight, with the market benefiting from a surprise drop in API distillate stocks last week, especially with US supply already at its lowest level for this point in the season in at least six years.
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