Written Commentary
CRUDE OIL
August Crude Oil was higher overnight, and it appears on course to close higher on the week for the first time in a month. The market quickly discounted this Wednesday’s EIA report, which showed a surprise increase in US crude stocks for the second week in a row, as well as an IEA report that lowered demand expectations for the second half of the year. In contrast to IEA, OPEC said yesterday that it does not see a peak in oil demand in its long-term forecast and it expects its demand to grow 166 million barrels per day or higher by 2045. The arrival of La Niña later this summer could spark a more active hurricane season and increase chances of refinery and shipping interruptions along the Gulf Coast. Yesterday’s PPI report showed a decline 0.2% for May, which was opposite expectations for a 0.1% increase and would seem to be one more reason for a Fed rate cut in September. Jobless claims increased 13,000 to a seasonally adjusted 242,000, which was a 10-month high. This suggests a labor market coming into balance. However, the Fed’s dot plot seems to be pointing to only one rate cut this year.
NATURAL GAS
The EIA inventory report yesterday showed a net injection of 74 bcf for the week ending June 7, which was right in line with average expectations. However, at 2,974 bcf, storage is running well above 2,618 from a year ago and is the highest in at least five years. The market sold off the wake of the report but held yesterday’s low overnight. The market rallied this week on hot weather in the forecast for the US. The Central Plains, Midwest and Great Lakes regions are expected to see highs in the mid to upper 90s over the next five days. Chicago, Indianapolis, and Detroit could reach 98 on Monday. The 6-10- and 8-14-day forecasts call for above normal temperatures across most of the lower 48 states, with brunt of the abnormal heat being felt in the Midwest and northeastern US. Montana, Idaho, and most of Wyoming, Utah, and Nevada escape the heat in the 6-10-day, but the entire west coast will be above normal. The 8-10-day has hotter than normal across the US except for the Northwest corner of the country and southwest Texas.
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