Written Commentary
CRUDE OIL
August Crude Oil was mixed overnight but traded in the upper half of yesterday’s range. The market has found support on expectations of stronger demand and on last week’s assurances by the Saudi Oil Minister that OPEC+ would stand ready to not end the “voluntary” output cuts in the fourth quarter if prices weaken. The trade is looking for this week’s US oil inventory reports to show crude stocks having fallen 2.3 million barrels for the week ending June 14 versus a net increase of 3.7 million the previous week. They are also looking for some indication that the summer driving demand season has begun. Implied gasoline demand readings have been disappointing recently. Distillate stocks are expected to be down 300,000 barrels versus a gain of 900,000 the previous week, and gasoline stock are expected to be up 1.5 million versus +2.6 million. No change is expected for refinery runs. The API report will be released this afternoon and the EIA report on Thursday due to the holiday tomorrow. Saudi crude oil exports totaled 5.968 million barrels per day in April, down from 6.413 million in March. Production rose to 8.986 million from 8.973 million in March. Several oil storage tanks were on fire overnight after a drone attack in Azov in the southern Russian region of Rostov, believed to have been instigated by Ukraine.
PRODUCT MARKETS
Gasoline prices have been lagging the rest of the complex, as US supply has been running close to the five-year average, and probably more importantly, implied demand has been lagging expectations. Last weeks’ EIA report showed implied US demand at 9.040 million barrels per day for the week ending June 7, which was better than 8.946 million the previous week but down from 9.913 million a year ago and down from 9.148 and 9.315 the previous two weeks. Trade expectations call for US gasoline stocks to be up 1.5 million barrels this week. Last week’s EIA report showed US gasoline supply at 233.5 million barrels versus 220.9 a year ago and a five-year average of 234.6 million. Distillate stocks are expected to be down 300,000 barrels this week. Last week’s report showed US stocks at 123.4 million barrels versus 113.9 million the previous week and a five-year average of 133.0 million
There could be choppy, two sided trade today ahead of the holiday and the EIA reports.
NATURAL GAS
Natural gas prices in Europe were slightly higher overnight, and that helped lift US prices off their lows from yesterday. Hotter weather expected for Europe is expected to boost power demand, Norwegian supply was lower, and wind power generation was down as well. The weekly EIA storage report on Friday is expected to show a net injection of 66-80 bcf for the week ending June 14 versus +74 bcf the previous week and +92 bcf a year ago. As of last week’s report total storage was 2,974 bcf versus 2,520 a year ago and a five-year average of 2,312. LNG exports could slip due to maintenance at two facilities on the Gulf Coast and one on the east coast, and the formation of the first tropical storm of the season in the Gulf of Mexico could interrupt terminal operations and bring cooler weather to Texas. The 3-7 day outlook is showing less intense heat than previously. The Great Lakes and Northeast peak at the mid to lower 90s. The 6-10 and 8-14 day does show above normal temperatures across the lower 48, except for the Pacific Northwest.
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