Written Commentary
CRUDE OIL
Crude oil has traded within a relatively tight early overnight, but this follows more than a week of volatile price action, as the market has been shaken by severe changes in global risk sentiment and key outside markets. For the market to maintain this upside momentum into the weekend, it probably needs to see additional signs that global demand will be improving during the third quarter. The IEA has forecast global demand to increase 2% next year and reach a record 101.6 million barrels per day (bpd), and this news may be giving crude oil with its strength this morning. Yesterday, crude oil and the products rebounded from early lows and went on to finish the day with moderate gains.
Both product markets finished Thursday with moderate gains, but ULSD clearly outperformed RBOB, as it has reached a new high for the move. RBOB prices are finding moderate pressure today but are holding their ground inside a tight range. US distillate stocks remain tight, having stayed below 110 million barrels for nine weeks in a row, a level that they had held above since May 2008. US average retail pump prices for regular unleaded gasoline remain above $5.00 per gallon, but they could be starting to level off.
NATURAL GAS
While natural gas is almost certain to finish the week with a loss, the market has been able to stay clear of Tuesday’s spike low. Hot weather in the forecast for much of the US over the next two weeks is expected to boost air conditioning and power plant demand. Texas was expected to see record power demand on Thursday and again on Monday. There were reports that the Nord Stream 1 pipeline has seen a further decline in the flow of Russian gas and is only operating at 40% of capacity. This may ramp up supply anxiety in Europe that could carry over into the North American market.
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