Written Commentary
CRUDE OIL
September Crude Oil extended its recent selloff overnight and traded to its lowest level since June 18. The market has pulled back on concerns that China’s sluggish economy will pull demand down in upcoming quarters. As reported yesterday, their second-quarter GDP grew 4.7% from a year earlier, the second slowest gain since the first quarter of 2023, and China’s refinery output fell 3.7% in June from a year earlier. The was the third straight month of declines and was the lowest in six months. For the moment, the market does not seem to be drawing much support from recent attacks by Yemen’s Houthis on ships in the Red and Mediterranean Seas. A spokesman for the group said yesterday they had targeted three vessels, including an oil tanker, with ballistic missiles, drones, and booby-trapped boats in response to Israel’s attack on a Gazan city over the weekend that killed at least 90 Palestinians. Nor did the market draw much support from Fed Chair Powell saying yesterday that inflation readings for the second quarter have added to confidence levels are returning to the Fed’s target in a sustainable fashion. An oil tanker capsized off Oman yesterday, leaving the 16-member crew still missing as of today. The ship is 117 meters long, which is on the small side, and is the type used for short coastal voyages. In Russia, the deputy prime minister said the global oil market will be balanced in the second half of the year and thereafter, thanks to the OPEC+ deal on production cuts. For the US inventory reports this week, a Reuters survey shows the trade looking for crude oil supply to be up 1.0 million barrels last week, with gasoline down 1.7 million and distillates down 0.5 million. Refinery utilization is expected to be steady at 95.4%.
PRODUCT MARKETS
September RBOB and ULSD are lower today in seemingly lock-step with crude oil. RBOB has fallen to the 50% retracement of the May-July rally, which sits at 2.4195 and could be a bull-bear line today. Additional support comes in at 2.3978, with resistance at 2.4532 and 2.4904.
NATURAL GAS
September Natural Gas pushed to new contract lows yesterday, as ample supply, cooler weather, and the slow restart of a key LNG facility in Texas pressured the market. Freeport LNG said yesterday that plans to restart one of three trains this week at its Texas facility after the company repairs some damage from Hurricane Beryl. It plans to restart the other two trains after it resumes operations, but production will be reduced while it continues repairs. The facility was shut down ahead on July 7 in anticipation of the hurricane, and the restart has been much slower than anticipated. For the weekly EIA storage report on Thursday , the trade is looking for an increase of 12-30 bcf last week. As of last week’s report, storage was running 9.7% above a year ago and 18.7% ahead of the fiver-year average. The weather forecast still calls for a cool-down across most of the eastern half the US over next week or so. The 6-10-day forecast has below normal temperatures over the Plains and the Midwest with normal temps on the eastern seaboard and Great Lakes. The west remains hot.
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