Written Commentary
CRUDE OIL
August Crude Oil was lower early Tuesday after both Israel and Iran said they had halted attacks on each other and traders once again turned hopeful that some sort of peace could be achieved. Another sharp drop in China’s crude imports also helped pressure the market. China’s import in May fell to 7.79 million barrels per day, their lowest since February 2018 and own from 9.3 million bpd in April, itself a multi-year low. They have been able to draw on reserves that they had built over the past several years, and the reduced buying has helped ease some of the tightness in the global market. The oil market has been gradually adjusting to the closure of the Strait of Hormuz, with a slowdown in consumption, producers finding alternative export routes, and few tankers managing to make it through the strait by shutting off their tracking equipment, but the US and IEA are also drawing on reserves, which cannot go on forever.
PRODUCTS
Product prices eased early Tuesday after Israel and Iran said they were halting attacks. For this week’s petroleum stocks reports, the early Reuters poll has an average expectation calling for US gasoline oil stocks to be -600,000 barrels for the week ending June 5, with distillates expected to be -200,000. Keep in mind that supplies for both are near six year lows.
NATURAL GAS
July Natural Gas was higher early Tuesday after falling to its lowest level since May 28 on a cooler weather forecast for the US that would limit air-conditioning consumption and therefore natural gas usage for electricity generation. The 6-10 and 8-14 day maps show below normal temperatures over most of the nation’s midsection, from the Rockies to the eastern Midwest/Great Lakes and extending into the Texas and the mid-south. If anything, it looks cooler than yesterday. For this week’s EIA storage report, the early Reuters poll has a range of expectations for US storage to be +96 to +102 billion cubic feet for the week ending June 5.
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