Written Commentary
CRUDE OIL
October Crude Oil gave back most of its gains from yesterday on reports that OPEC+ is considering another production increase when they meet on September 7. If they do that, they would be starting to unwind a second layer of output cuts that total about 1.65 million barrels per day and which were supposed to stay in place until the end of next year. Just yesterday there was word that they were not planning an increase. The crude oil market found support yesterday from news that the US Treasury Department had sanctioned a network of shipping companies and vessels for smuggling Iranian oil. Also supportive was a report that Saudi Aramco and Iraq’s state oil company SOMO had stopped selling crude oil to India’s Nayara Energy, a Russia-backed refiner, in the aftermath of the sanctions imposed in July by the European Union. The talk of OPEC+ expanding production highlights the ability of the group to act as a relief valve against supply restrictions stemming from sanctions on Iran and Russia, should it come to that. Not that the Russia is having trouble selling crude to India or China at the moment.
NATURAL GAS
October Natural Gas extended its recent bounce to trade to its highest level since August 8 overnight. The market reached an 8-month low in August on well above average weekly US storage builds, as US production outpaced demand at a significant rate. However, that trend has started to change, with last week’s build coming in below average for third week out of the previous four. For the EIA report this week, the early Reuters poll has an average trade expectation calling for US natural gas storage to be +55 to +61 bcf for the week ending August 29. If this proves true, it would be counter to the recent trend, as the five-year average change for the week is +31 bcf. Storage levels have a seasonal tendency to build into November with the approach of the heating season.
PRODUCTS
The products are holding up better than crude oil, especially ULSD, which is moving into its primary demand season.
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