Written Commentary
CRUDE OIL
October Crude Oil was lower overnight but held Friday’s lows. The market has been disappointed with China’s economic data and reduced prospects for oil consumption. However, lower inflation numbers in the US appear to have opened the door for a Fed rate cut next month. The trade will be parsing Fed Chair Powell’s comments from the Jackson Hole gathering this week. There are also persistent concerns about supply being interrupted if the Israel-Hamas conflict spreads or the Russia-Ukraine war escalates. Chinese gasoline exports totaled 790,000 metric tons in July, down from 930,000 tons in June and 1.22 million in July 2023. Poor refiner margins were blamed, and this is another reason traders to be apprehensive about China’s crude oil demand. US Oil Rigs in operation fell by 2 last week to 483, down from 520 a year ago. Friday’s Commitment of Traders Report showed managed money traders were net buyers of 12,479 contracts of crude oil for the week ending August 13, increasing their net long to 200,740. This is far from the record net long of 496,000 from January 2018, which limits the long-liquidation threat.
PRODUCT MARKETS
Friday’s Commitment of Traders Report showed managed money traders were net buyers of 6,228 contracts of RBOB for the week ending August 13, increasing their net long to 13,852. This is close to a neutral position. For ULSD, managed money traders were net buyers of 3,853 contracts, reducing their net short to 20,480. This is a moderate net short position when compared to the record of 45,000 from November 2015.
NATURAL GAS
October Natural Gas managed a mild recovery overnight following Friday’s selloff. A warming trend across much of the lower 48 over the next couple of weeks could allow for a late season surge in cooling demand. 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 Baker Hughes gas rig count increased by 1 last week to 98 but was down from 117 a year ago. US supply is still running ahead of last year and the five-year average, but the surplus has been declining through the summer. EIA gas storage actually fell 6 bcf last week, which is unusual for this time of the year. This was the first decline during the summer months in at least five years. Friday’s Commitment of Traders Report showed managed money traders were net sellers of 9,625 contracts of natural gas for the week ending August 13, increasing their net short to 61,413. This is close to a neutral position.
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