Written Commentary
CRUDE OIL
August Crude Oil is higher this morning, perhaps getting a boost from a cool CPI report this morning that pointed to lower inflation. The China/US trade talks concluded, with both sides saying an agreement was reached, but there were few details. Any agreement may be viewed as better than the alternative. The API report last night was slightly supportive for crude oil and bearish for the products, with US crude oil stocks -370,000 barrels last week versus expectations calling for -200,000. Gasoline stocks were +3 million barrels versus +900,000 expected, and distillates were +3.7 million versus +800,000 expected. The EIA report will be released later this morning, and in addition to the stocks numbers, refinery runs are expected to be +0.2% to 93.6%. In their short-term energy outlook, EIA said it expects US crude oil production to fall to about 13.37 million barrels per day (bpd) in 2026, down from an average of 13.42 million this year, citing the drop in oil rigs. It had previously forecast US output to grow to 13.49 million bpd next year. Bellicose statements from US and Iranian leaders ahead of a sixth round of talks this weekend have dimmed hopes for an agreement.
NATURAL GAS
July Natural Gas is higher this morning after falling to its lowest level since May 30 yesterday and overnight. The forecast for above normal temperatures across most of the lower 48 states may finally allow US cooling demand to exceed average levels. For the EIA storage report this week, the early Reuters poll of analysts has an range of expectations for US storage to be +96 to +112 bcf for the week ending June 6. The five-year average change for the week is +88. As of last week’s report, storage was -10.4% from a year ago but +4.1% from the five-year average. Flows to LNG export facilities may still lag due to spring maintenance. In their short term energy outlook, EIA forecast US natural gas output and demand to both reach record highs in 2025. Dry
PRODUCTS
The products are higher this morning on crude market strength, despite bearish API numbers last night. Today’s action may depend on the EIA results, especially if US gasoline implied demand does not recover from last week’s dismal number of 8.263 million barrels per day, which was the lowest for that week since 2020.
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