Energy Brief for Aug 2.23
by market analysts Stephen Platt and Mike McElroy
The petroleum complex traded in a surprisingly weak fashion falling 1,78 in Sept Crude following early strength linked to the DOE report which showed a record large decline in crude inventories of 17 mb. An overbought condition helped exacerbate the declines along with the failure to respond to the marked decline in inventories. In the background contributing to bearish sentiment was the downgrade by Fitch to US debt , dollar strength and the prospect the Saudi’s despite recent speculation that a voluntary cut in August might back off from the anticipated cut given the surprising decline in stocks. In addition the US withdrawing their bid for 6 mb for the Strategic Petroleum Reserve might also have played a role in the surprising setback.
The DOE report showed crude inventories falling by a record large 17 mb for the week ended 7/28/23. Gasoline stocks built by 1.5 mb while distillate fell by .8 mb. Total stocks of Crude and products fell 10.4 mb in the latest week. Stocks in Cushing fell 1.2 mb to 34.5 mb. Refinery utilization slipped to 92.7 percent from 93.4 in the prior week. Net export level rose to 3.1 mb of both crude and products suggesting offshore demand appears to be picking up once again particularly from Asia. Surprisingly disappearance levels for products dropped to 20.0 mb with gasoline at8.8 mb and distillate at 3.8 mb compared to 3.7 mb last week.
The inventory situation globally continues to be watched closely. Forecasts global inventories will show sizable drops in July and August appear to be coming to fruition and should help support values. Nevertheless, Saudi action at the Joint Price Monitoring Committee on August 4 will be watched closely and whether the voluntary output cut of 1 mb/d is extended or cut back is certainly on the table and could keep the market cautious. Today’s price reversal could attract additional selling that might carry values toward the 75-76 level where renewed support is likely to emerge.
Nat gas prices eased falling 8.3 cents today to 2,477 basis Sept. The weakness was linked to maintenance of high production levels, lower than expected LNG shipments and forecasts for temperatures to moderate over the next two weeks from the record heat that had been apparent in July. For tomorrow, the EIA report is likely to be in focus with forecasts for an injection of 24 bcf compared to 16 bcf last week and 37 bcf a year ago. Resistance appears near the 2,65 range in Sept with the penetration of support near the 2.50 area today basis Sept potentially leading to a test of the 2.35 area basis Sept on the downside.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.