Written Commentary
CRUDE OIL
August Crude Oil is chopping around inside the range set earlier this week. The market is focused on the Israel/Iran war and whether the US will join in the conflict. President Trump is reportedly considering a range of options, including a US strike on nuclear facilities in Iran. Another concern is whether Iran will attempt to mine the Strait of Hormuz. Some have suggested that such a move would only be as a last resort, pointing out that Iran has never chosen to do so during previous conflicts. In the face of these threats, shipping rates have increased with the benchmark daily rate for a very large crude carrier having risen 40% since last Friday. Qatar’s national energy company instructed liquefied natural gas and oil tankers to stay outside Hormuz and to enter the Gulf only the day before loading. The trade may also be awaiting today’s Fed rate decision, but we suspect the focus will remain on the developments in the Middle East. Yesterday’s API report showed US crude oil stocks were down 10.1 million barrels last week versus expectations from the Reuters poll calling for a decline of 1.8 million in this week’s reports. Gasoline stocks were -202,000 barrels versus -400,000 expected, and distillates were +318,000 versus +600,000 expected. EIA weekly data will be released this morning.
NATURAL GAS
August Natural Gas is higher for the third straight day, as threats of an interruption in LNG shipping out of the Mideast have supported demand potential for US LNG. Qatar has said gas production at the world’s largest gas field was steady after it was hit by an Israeli air strike on Saturday. However, on Tuesday Qatar Energy did instruct LNG and oil tankers to remain outside the Strait of Hormuz and to enter the Persian Gulf only on the day before loading. The weekly US storage report will be released at 11:00 AM Central time today, one day early because of the holiday tomorrow. For the report the Reuters poll has an average expectation calling for a net injection of 98 bcf last week (range +89 to +111). The five-year average change for the week is +68 bcf. Last week’s report showed total storage was down -9.0% from a year ago but 4.8% above the five-year average.
According to NWS, the heat wave this week could gradually diminish over the next two weeks.
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