Written Commentary
CRUDE OIL
September Crude Oil extended yesterday’s losses overnight. The lack of a response (so far) by Iran to the killing of a Hamas leader in their country has eased concerns about a supply interruption, and this has allowed global demand to reemerge as a theme. On top of concerns about China, now there are worries that the US Fed may have waited too long to cut rates and that the ‘soft landing” may be in jeopardy. This puts additional focus on the US jobs report this morning, as a weak number could be reinforce ideas that the Fed has indeed waited too long. As expected, OPEC+ left its plans to start unwinding output cuts in October, but the group repeated that these plans can change depending on market conditions. LSEG reported yesterday that Asia’s crude oil imports fell 24.88 million barrels per day in July, down 6.1% from June and their lowest per day amount since July 2022. This undermines OPEC’s forecast for a 2.25 million barrel per day increase in global demand for 2024, which was based on strong demand from China. Even the more modest 970,000 bpd growth forecast by IEA is based on a 40% increase in Chinese demand. Chevron reported an earnings miss this morning, blaming industry-wide pressure from lower refinery margins and natural gas prices.
PRODUCT MARKETS
RBOB and ULSD are both under pressure this morning, in line with crude oil, as Mideast concerns have been pushed aside and demand concerns have reemerged as the focus.
NATURAL GAS
September Natural Gas is slightly higher today after extending yesterday’s move to a new contract low ever so slightly overnight. The market sold off yesterday despite the EIA report showing a smaller than expected increase in US gas storage last week. The market traded to a new high for the day immediately after the report but fell back on a less bullish weather report and ample US supply. LSEG estimates that US LNG exports in fell to 6.69 million metric tons in July, their lowest since April and their second lowest this year. This was due to the closure of the Freeport facility for eight days in the wake of Hurricane Beryl. Yesterday’s EIA report showed US gas storage totaled 3,249 billion cubic feet as of July 26, up +18 bcf from 3,231 the previous week. This was below the low end of the range of expectations from +27 to +45. Storage is up 8.4% from a year ago and 15.7% above the five-year average, versus +8.2% and +16.5% in last week’s report. LSEG said yesterday that gas output in the lower 48 states rose to an average of 103.4 billion cubic feet per day in July, up from 101.0 bcfd in June but still below the record of 105.5 last December.
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