Written Commentary
CRUDE OIL
After a three day rally off of optimism for US interest rate cuts, Mideast tensions, and a shutdown in Libyan oil production, the crude oil market is back on the defensive. October crude oil extended yesterday’s selloff overnight and is back towards the middle of the trading range of the past month. Concerns about lower demand from China have been a regular source of pressure, but US crude supplies have fallen for seven out of the past eight weeks and are 2% below a year ago and 5% below the five-year average for this week. The API report yesterday apparently did not show a departure from expectations. Reuters reported API crude oil stocks -3.407 million barrels last week versus -2.3 million expected, with gasoline stocks -1.863 million versus -1.6 million expected, and distillates were -1.405 million versus -1.1 million. The EIA report will be released this morning. Refinery runs are expected to be up 0.2% to 92.5%. it has not been unusual for the EIA report to contradict the API numbers.
NATURAL GAS
October Natural Gas was lower overnight but held yesterday’s low. The late summer heat wave in the Midwest could boost US power usage this week after the cooler conditions last week. The 6-10 day forecast has cooler than normal temps dominating over the eastern half of the US, but the 8-14 day has above normal temperatures expanding from the western half of the US into the northern Midwest, which could extend the cooling season a bit. For the EIA inventory report tomorrow, a Reuters survey has an average trade expectation for an injection of 33-55 bcf for the week ending August 23. US gas supply is still well ahead of year ago, but lower than average injections have narrowed the surplus over the past few months.
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