Written Commentary
CRUDE OIL
October Crude is a under pressure this morning ahead of the Trump-Putin talks in Alaska. If a deal is reached, it would forestall the threatened sanctions on Russian crude and remove the threat of lower global supply. Based on the action overnight, the market appears to be expecting some sort of gesture towards peace on Putin’s part. Trump has been threatening steep tariffs on countries buying Russian crude oil (namely India and China) if Putin does not take steps to end the Ukraine war. If the talks fail, oil could rally sharply on ideas that India and China would be pressured into not buying Russian oil. Oil throughput at Chinese refineries rose 8.9% year-on-year in July. This was down from June levels, but that was the highest since September 2023.
NATURAL GAS
Wednesday. The market quickly discounted yesterday’s EIA storage report, which was bearish against expectations, and this in itself is a bullish development as it suggests that sellers are getting tired. The EIA report showed US gas storage for the week ending August 8 at 3,186 bcf, +56 bcf from the previous week. This was above the average trade expectation of +54 and above the five-year average change for the week at +31. Storage was -2.4% from a year ago and +6.5% from the five-year average versus -4.3% and +5.7% the previous week. The storage build was back above the five-year average after slipping below it for only the second time since April the previous week. The 6-10 and 8-14 day weather forecasts call for a mix of above normal temps in the West and Southeast and below normal in the Midwest and Northeast, but it is getting a bit late in the season for this to have much of an impact on demand. LSEG said average gas output in the Lower 48 states has risen to 108.1 billion cubic feet per day so far in August, up from a record 107.9 bcfd in July. The average amount of gas flowing to the eight big US LNG export plants has risen to 16.2 bcfd so far in August, up from 15.5 bcfd in July and above the record 16.0 bcfd from April.
PRODUCTS
Product prices are lower this morning in line with crude oil, as the markets are seeing pressure ahead of the Trump-Putin talks. From the initial moves, it seems traders are expected enough of a gesture on Putin’s part to forestall the draconian tariffs against buyers of Russian crude oil.
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