Written Commentary
CRUDE OIL
July Crude Oil has been holding in a sideways pattern this week, finding support from bearish fundamentals that turned out to be less bearish than feared, but the market seems poised to test two month high of 64.19. Last weekend, OPEC+ agreed to another sharp 411,000 barrel per day increase in production for July as expected, but not a big as some rumors were having it late last week. Saudi Arabia lowered prices for Asian buyers yesterday by 20 cents, but that was smaller than the expected 40-50 cent declines. Yesterday’s weekly EIA stocks report showed a larger than expected decline is US crude oil stocks last week, but that was offset by larger than expected increases in gasoline and distillate stocks. Refineries were busy, with operations increasing 3.2% versus +0.8% expected. Implied gasoline demand plunged, which pressured RBOB prices. On the trade and tariff front, a lack progress with China (Trump said Chinese President Xi is “extremely hard to make a deal with”) and very few if any deals announced with other trading partners after yesterday’s deadline, keeps demand concerns alive.
NATURAL GAS
July Natural Gas extended this week’s rally overnight but the looming EIA gas storage report may have kept traders reluctant to push the market too far. For the report, the Reuters poll has an average expectation for a net injection of 111 bcf for the week ending May 30 (range +95 to +126 bcf). The five-year average change for the week is +100. Last week’s report had an injection of 115 bcf, and storage was down -12.8% from a year ago but 3.2% above the five-year average versus. The 6-10 day forecast has a mix of above and below normal temperatures across the US, which does not point to any excessive cooling demand.
PRODUCTS
Larger than expected increases in distillate and gasoline supplies last week pressure the RBOB and ULSD markets yesterday, with RBOB especially getting hit by a drop in implied gasoline demand. This followed a jump in demand the previous week ahead of the Memorial Day holiday. Both market benefiting from higher crude oil prices today.
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