Written Commentary
CRUDE OIL
June Crude Oil traded to its highest level since April 4 overnight, but it has backed off from its highs, perhaps on disappointment that the market did not make further gains after some bullish news over the past 24 hours. The market could be taking a wait ‘n see attitude ahead of this morning’s EIA supply report. The US Treasury Department issued new sanctions yesterday targeting an Iranian magnate involved in the shipment of Iranian LPG and crude oil to foreign markets. Iran’s Foreign Ministry spokesperson responded that the sanctions point to Washington’s “lack of goodwill and seriousness” regarding the Iran-US nuclear talks. Those talks are expected to continue this weekend. The Trump administration has said they will push Iran’s exports to zero if there no agreement. Trump’s backing away from his threats to fire Fed Chair Jerome Powell lifted the stock market and provided some support to crude oil. Treasury Secretary Bessent said yesterday that he believed there would be a de-escalation in US-China trade tensions but that negotiations had not yet started and would be a “slog.” This could be the most upbeat comment regarding China/US relations in some time. The IMF yesterday cuts its global growth forecast by 0.5% for 2025 to 2.8%, citing the impact of the US tariffs. The API report yesterday came in bullish, with US crude oil stocks -4.6 million barrels last week versus expectations for -800,000. Gasoline stocks were -2.2 million versus -1.4 million expected, and distillates were -1.6 million barrels versus expectations for no change
NATURAL GAS
July Natural Gas is near unchanged this morning and is close to yesterday’s 4-month low. The market may have drawn some support from a report that the European Commission is assessing whether it could legislate to forbid firms in the European Union from signing new contracts for Russian fossil fuels, notably natural gas. The EC is also said to be working on legal options to allow EU companies to break existing gas supply contracts with Russia without facing penalties. Russian pipeline gas deliveries have plunged since they invaded Ukraine in 2022, but the EU did increase its imports of Russian LNG last year, and they still got 19% of their total gas and LNG supply from Russia. US LNG exports have benefited from the loss of Russian supply to Europe. For the EIA storage report tomorrow, the early Reuters poll has expectations for a net injection of 54-80 bcf last week. The five year average change for the week is +62 bcf. As of last week’s report, storage was -20.9% from a year ago and -4.4% below the five-year. Warmer than normal temperatures persist for most of the Lower 48 US states in the 6-10-day and 8-14-day forecasts, which points to stronger than average builds in the weeks ahead.
PRODUCT MARKETS
API gasoline stocks were -2.2 million versus -1.4 million expected, and distillates were -1.6 million barrels versus expectations for no change. The EIA report is due out this morning. June RBOB traded to its highest level since April 4 overnight but is back lower this morning.
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