Written Commentary
CRUDE OIL
The new high for the move in September oil this morning is justified by a massive 15.4-million-barrel outflow from API crude oil inventories. If the 15.5-million-barrel decline in API inventories is not adjusted lower that will be the largest decline in crude inventories ever with records beginning in 1982. The bull camp should be further emboldened by news that Russian seaborne exports fell to their lowest level in 7 months with an average daily flow of 2.9 million barrels per day or a decline of 900,000 barrels per day from the high level posted in May. Furthermore, OPEC output in July fell by the most since 2020 with a reduction of 900,000, bpd but the brunt of those reductions were the result of Saudi Arabia unilateral cuts with the Russian cuts in August likely to show up in supply reports next month. Strength in crude oil prices has resulted in the Biden administration delaying its efforts to refill the strategic reserve with an added measure of buying interest created by a 1.7% week over week decline in ARA crude oil inventories. Yet another bullish development overnight came from the closure of Mexico’s largest oil export terminal because of a leak with that shutdown taking place during the summer demand surge.
PRODUCT MARKETS
While gasoline did not make a fresh higher high for the move overnight, prices sit just under breakout levels and should be supported from a 1.7-million-barrel decline in API gasoline inventories and from predictions of firmer crack margins. While the gasoline market has lost upside momentum over the prior 3 trading sessions, speculative long interest remains in place with open interest remaining high. It is possible that a surging US dollar will entice the purchase of European gas supply for import into the US East Coast thereby tempering fear of a shortage in the region. On the other hand, fear from the demand front should also be present in the trade with US economic data showing noted weakness for a 2nd straight trading session.
NATURAL GAS
With portions of the US seeing cooler temperatures and more substantial rain events, the potential for significant cooling demand (on a nationwide basis) is reduced. It should be noted that there are 2 tropical disturbances in the Atlantic, one of which is too far north to be a significant threat and another too far north and already parallel to Washington DC to impact production. However, with portions of the storm throwing showers and clouds along the eastern seaboard, cooling demand might also be temporarily reduced. Minimal positive developments include Looking ahead to this week’s extreme temperature forecast from the National Weather Service, but the triple digit readings are mostly restricted to the very southern portions of the country with a vast majority of the US experiencing normal temperatures.
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