Written Commentary
CRUDE OIL
September Crude Oil was near unchanged overnight following yesterday’s price collapse off concerns about US demand, in the wake of a disappointing jobs report on Friday, worries about a potential US recession, and a steep selloff in equities. The market did stage a significant bounce off its lows yesterday. The potential for an escalation of hostilities in the Mideast provide some support, as Israel and the US are bracing for a retaliatory move by Iran after the killings of a Hamas leader in Tehran last week. To date, the Mideast conflict has not brought any significant interruptions in supply. For the US inventory reports this week, a Reuters poll has an average expectation for crude oil stocks show an increase of 900,000 barrels last week, with distillates up 200,000 and gasoline down 1.9 million. Refinery runs are expected to be up 0.9% to 91.0%. Traders are noting a discrepancy between the EIA weekly reports, which showed gasoline consumption in May at 9 million barrels per day versus 9.1 mbpd last year, and the monthly report for May that showed consumption 400,000 bpd higher.
PRODUCT MARKETS
Like crude oil, RBOB and ULSD may be getting overdone on demand concerns, especially if US demand is better than previously thought. The trade may be revaluating previous assumptions about the degree to which EVs and hybrids are cutting into gasoline consumption.
NATURAL GAS
September Natural Gas was near unchanged overnight after falling to a new contract low yesterday amidst panic selling in equity markets off fears of a US recession. Always in the background is the ample US supply relative to last year. For the weekly EIA storage report on Thursday, analysts are looking for US gas storage to show an increase of 16-35 bcf last week. The five year average has an increase of 38 bcf for the week. Last week’s report showed supply was running 8.4% above a year ago and 15.7% above the average. Weather has turned bearish this week with Hurricane Debby bringing lower temperatures and potential power outages, which lowers natural gas consumption. A cooler trend over much of the northern half of the lower 48 and most of the eastern half in the 6-10 day forecast will also reduce cooling demand. However, a return to above normal conditions across a broad swath of the nation’s mid-section in the 8-14 day could revive demand.
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