Written Commentary
by market analysts Stephen Platt and Mike McElroy
Price Overview
The petroleum complex traded in a firm fashion with Crude settling up 1.22 at 81.80, ULSD +3.57 and gasoline up .79 at 2.8955 basis Sept. Speculation the Saudi’s despite the improvement in prices will maintain their voluntary cut of 1 mb/d into September at the next OPEC Monitoring Meeting scheduled for August 4th provided support. In the background was the ongoing strength to equity values and optimism over prospects for the economy.
The inventory situation globally continues to be watched closely. Forecasts global inventories will show sizable drops in July and August has helped underpin good buying interest. Prospects that the Saudis will extend their voluntary cut of 1 mb/d has exacerbated the concerns. Although Chinese economic prospects continue to be monitored as potential source of selling, the low level of product stocks continue and strong demand tied to travel this summer continues to keep refinery throughput at high levels.
The strength to the US economy, the appearance that Chinese authorities will continue to take fiscal and monetary measures to support growth, and the moderation in availability of Russian supplies should continue to support values on pullbacks as inventories decline moderately into the 4th quarter. The availability of Russian products and crude are getting tighter as the premium to the price cap restrains interest. The potential for further declines in US crude and product inventories should underpin values, with an extension of the voluntary cut by the Saudis providing the basis for an upside move toward the 83.50-84.00 level basis Sept WTI Crude.
The DOE report is expected to show crude stocks -.9, distillate +.8 and gasoline -1.4 mb. Refinery utilization is expected +.1 to 93.5 percent.
Natural Gas
Nat gas prices eased falling .4 cents to 2.6340 basis September. Forecasts predicting less hot weather than previously expected for the next two weeks along with less than full utilization at several LNG plants limited fresh buying interest. High production levels with gas output rising to 101,6 in July from 101 bcf/d in June remains in the background as a bearish influence. With forecast of hotter than normal temps into mid-August along with a pickup in LNG shipments to Asia should help underpin values near current levels despite high storage in Europe and the US. Nevertheless shipments remain short of the record high reached in April of 14 at 12.7 bcf in July. On the downside, minor support should surface at 2.55 followed by 2.50. Resistance now emerges at the confluence of the 9, 20, and 100-day moving averages in the 2.64-2.66 range. A push through that area targets the recent highs near 2.76. The EIA report is forecast to show an injection of 24 bcf compared to 16 bcf last week and 37 bcf a year ago.
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