Written Commentary
by market analysts Stephen Platt and Mike McElroy
Price Overview
The petroleum complex traded under pressure with WTI settling off 83 cents at $82.33. The weakness was linked to optimism over a potential ceasefire in Gaza along with the weekend election results in both France and Iran. In Iran, the election of a more moderate leaning President was a slight move toward a candidate who was publicly committed to relaxing the country’s strict moral codes regarding women and reviving dialogue with the West. The fact that he was allowed to run at all after being banned 2021 suggests that the establishment did not see him as a threat, but also signaled a level of public concern over the hardline policies his opponent espoused. Whether it changes the dynamics in Middle East politics and relations with Israel remains to be seen given the Ayatollah’s control over security and military matters. The elections in France saw a divided outcome with the vote moving away from the right-wing party to a split parliament. French relations with Ukraine and NATO will see little change, at least for now, with Macron still president for another three years. The political environment remains turbulent with the US Presidential election at the forefront of concern.
Hurricane Beryl moved onshore in Texas, where key oil ports were closed on concerns over damage, particularly at oil refineries from high winds and flooding. Ideas that disruptions would not be substantial limited buying interest.
Key to the outlook will be gasoline disappearance levels over the next few weeks. Apprehension over OPEC production levels could surface on the upside toward 85.00 basis August given reports that their output rose for the second month in June as Iraq and Kazakhstan exceeded targets and Iranian production reached 3.2 mb/d, matching their highest rate since November of 2023. Signs the US economy might be slowing along with concerns over the pace of economic growth in China and Europe will offer overhead resistance on ideas that inventory levels might not fall as much as expected in the third quarter.
Natural Gas
The market probed out a new low for the move Friday and again overnight as the August traded down to 2.268 before finally seeing buying interest emerge into the day session and settling 4.7 cents higher at 2.366. The abundance of negative fundamentals reached a peak over the weekend as Beryl moved into Texas and was downgraded to a tropical storm, cooling temperatures and disrupting LNG flows along the coast. Freeport saw nearly complete outages over the weekend in preparation, as overall nominations dropped to the 11 bcf/d area. Production saw minor effects in the Gulf, holding above 102 bcf/d to remain a downward influence. Despite the abundance of negative news flow the market was able to scrounge up buying interest from the return of above normal temperatures to the forecast, with the 15-day outlooks pointing to record Population Weighted Cooling Degree Days. The next few sessions may decide whether the downside has been exhausted, with a settlement back above the 9-day moving average, currently at 2.546, a sign that a bottom is in.
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