Written Commentary
CRUDE OIL
September Crude Oil is higher this morning and has traded to its highest level since Monday. Equity markets are higher as well, and so far it looks like Monday’s low was an overreaction. Reuters reported that API crude stocks increased by 176,000 barrels for the week ending August 2, with gasoline inventories up 3.3 million and distillates up 1.2 million. This was at the bearish end of trade expectations, which are calling for a decrease of 700,000 barrels in crude oil, distillates to be up 200,000 and gasoline to be down 1.0 million. The weekly EIA report will be released this morning. Refinery runs are expected to be up 0.8% to 90.9%. The market may be drawing some support from concerns that global supplies will be interrupted if the war in the Middle East expands. Chinese crude oil imports fell to 9.97 million barrels per day in July, the lowest per day number since September 2022. They are the largest importer in the world, and their slow economy has traders concerned about global oil consumption. China has imported 10.9 mbpd in the first seven months of the year, which is down 2.9% from the first seven months of 2022.
PRODUCT MARKETS
Like crude oil, RBOB and ULSD were higher overnight after getting overdone on demand concerns. The market discounted bearish API numbers and low Chinese import number, but they have to face an EIA report this morning.
NATURAL GAS
September Natural Gas was higher overnight for the second straight session after putting in a contract low on Monday. The steep selloff in equities at the end of last week and into the beginning of this week may have pushed gas prices to unsustainably low levels. US gas storage levels are running well above average, and below average temperatures as lowering expectations for cooling demand this week, but temperatures are expected to turn higher next week. For the weekly EIA storage report on Thursday, the latest Reuters poll has analysts looking for US gas storage to show an increase of 16-35 bcf last week. In their short term energy outlook EIA called for US natural gas consumption to average 46 bcf per day in August, down 2% from July. Dry natural gas production is expect to stay steady in July. They also lowered their forecast for US gas production in 2024 to 103.3 bcfd from a previous forecast of 103.5 and from 103.8 in 2023.
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