Written Commentary
CRUDE OIL
Crude oil and the products broke out above last Monday’s highs overnight and traded to their highest levels since the early part of August, but the action has been volatile. Reports that Asian crude oil imports were up sharply in August due to strong buying by China and India from the Middle East may have lent support. LSEG date indicated that arrivals totaled 27.18 million barrels per day (bpd), up from 24.91 million bpd in July and 26.39 million pd from August 2024. However, July arrivals were the lowest in a year, and Augusts arrivals were slightly weaker than June. There was also a report from Reuters that the that recent Ukrainian attacks on Russian oil infrastructure have forced the closure of 17% of Russia’s oil-processing capacity. Friday’s Baker Hughes rig count showed US oil rigs in operation were up 1 last week to 412. This was down from 483 rigs a year ago and below the five-year average of 433. Traders are looking ahead to the OPEC+ meeting on September 7, and there seems to some doubt that they will continue to lift their production quotas.
NATURAL GAS
October Natural Gas has reversed lower this morning after trading to its highest level since August 12 overnight. The market managed to push through the August 15 high but did not follow through to the upside, and this appeared to bring in sellers. Friday’s The Baker Hughes rig count showed US natural gas rigs in operation were down 3 rigs to 119 last week. This was up from 95 rigs a year ago and above the five-year average of 109. We are entering shoulder season when cooling demand drops off and heating demand is still slow. Weekly US gas storage builds are starting to slow relative to the average pace for this time of year. Last week’s EIA report showed storage was +18 bcf from the previous week versus an average trade expectation of +26 and a five-year average change of +40. This was the third time in four weeks that the supply build was below the five year average.
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