Written Commentary
CRUDE OIL
October Crude Oil extended yesterday’s recovery move overnight and was approach the upper end of a two-week range. In addition to a strong weekly EIA energy stocks report yesterday, the market may have also drawn support from diminished prospects for a cease fire in Ukraine. Russian embassy officials in New Delhi said on Wednesday that Moscow expects to continue supplying oil to India. This follows reports that two of India’s state-run refiners had resumed their purchases of Russian crude oil after suspending them last month. The EIA report yesterday came bullish versus expectations for crude oil and gasoline and bearish for diesel. Crude oil stocks fell 6 million barrels, much more than expected, and gasoline stocks fell 2.7 million, which was more than expected. Distillate stocks increased more than expected. Refinery runs continue to run at record levels
NATURAL GAS
Natural gas was slightly higher overnight as it attempted some semblance of short covering after falling to its lowest level since last November this week. Mild temperatures in the US reduce the odds of a late-season surge in cooling demand, and that coupled with record US production suggests supply will remain ample. Over the long term, higher demand for electricity for data centers could support natural gas demand, and trade deals with Asian countries include commitments to purchase more US energy products, including LNG. For the weekly EIA report this morning, the Reuters poll has an average expectation for US gas storage to be +22 bcf for the week ending August 15, with a range of expectations from +13 to +32. The five-year average change for this week is +40 bcf, with a five-year range for the week of +18 to +60. As of last week, storage was down 2.4% from a year ago and 6.5% above the five-year average. LSEG said average gas output in the Lower 48 states has risen to 108.4 billion cubic feet per day so far in August, up from a record 107.8 bcfd in July
PRODUCTS
The EIA report yesterday showed gasoline stocks -2.7 million barrels last week versus -1.8 million expected and distillate stocks +2.3 million versus 900,000 expected. Refinery runs were up 0.2% versus -0.7% expected, as they continue to run near record levels. Implied gasoline demand was down from the previous week and below a year ago. Gasoline stocks are continuing their seasonal decline, and distillate stocks continue to build off their record lows.
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