Written Commentary
CRUDE OIL
Crude prices were moderately higher overnight, with traders citing optimism that the Fed will cut interest rates in September. Yesterday’s CPI number showed the slowest year over year gain in almost 3 ½ years, and this contributed to ideas that inflation is coming under control. Yesterday’s EIA report showed US crude oil stocks increased by 1.4 million barrels for the week ending August 9, which was counter expectations for a 2.0 million barrel decline and was in sharp contrast to the API report on Tuesday that showed a decline of 5.2 million barrels. This week’s increase followed six straight weeks of declines in US stocks. China’s oil refinery outlook fell 6.1% from year ago levels in July, the fourth straight month of declines, according to national statistics data released overnight. Refiners processed the equivalent of 13.91 million barrels per day, down from 14.19 million bpd in June and the slowest since October 2022. Chinese gasoline demand rose 3.3% from June, which was a slower increase than last year. Some of the slowdown is being attributed to the growing popularity of electric vehicles. Half of all vehicles sold in China last month were either EVs or hybrids. Other Chinese economic data was mixed, with industrial output growing 5.1% year on year in July versus +5.3% in June and expectations for +5.2% and retail sales up 2.7% in July versus, up from +2.0% in June and +2.6% expected. The trade is still waiting for a retaliatory move by Iran for the killing of a Hamas leader in Tehran. Iran is seems to be using this as a negotiating point, as it said yesterday that only a ceasefire deal between Hamas and Israel would keep them from making a move.
PRODUCT MARKETS
The EIA report yesterday showed US gasoline stocks fell by 2.9 million barrels last week versus -1.1 million expected. Implied gasoline demand was 9.045 million barrels per day versus 8.967 million the previous week and 8.851 million a year ago. But despite the bullish numbers, October RBOB followed crude oil by selling off on the news and recovering slightly overnight. EIA distillate stocks fell -1.7 million barrels last week versus -1.8 million expected. Diesel consumption in China is estimated to be down 11% in July from year ago levels.
NATURAL GAS
September Natural Gas was near unchanged overnight following yesterday’s move to its highest level since July 23. World Weather Service says the US will see a warmer than normal temperature bias and higher than usual cooling fuel demand through the next two weeks. The NWS has the heat concentrated in the Rockies, Plains and across the south, with Midwest, Great Lakes, New England, Mid-Atlantic, and the northern Pacific Coast seeing normal to below normal temperatures. Reuters reports a rise in LNG feedgas today with Sabine Pass up above 4 bcf and Freeport up after a dip yesterday, which improves natural gas offtake. For the EIA storage report this morning, the Reuters poll has expectations ranging from -3 bcf to +26. Last week’s report showed stocks 8.2% ahead of a year ago and 14.9% above the five-year average, but injections have slowed in recent weeks, and the surpluses have narrowed.
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