Written Commentary
CRUDE OIL
August Crude Oil is higher this morning, extending its rally that started on Friday and reaching its highest level since April 4. There is apparently a sense of optimism regarding the US-China trade talks in London, which are in their second day. The mere fact that they are talking has raised hopes for some sort of agreement to reduce tariffs and ease the curbs on China’s rare earth exports. OPEC oil output rose in May, according to a Reuters survey, but the increase was less than what the OPEC+ agreement had allowed. OPEC reportedly pumped around 26.75 million barrels per day, up 150,000 bpd from April. This may have eased concerns that the lifting of the OPEC+ quotas would bring a flood of supply. The wildfires in Canada add to concerns about crude production there. For the US stocks reports this week, the early Reuters poll of analysts has an average expectation for US crude oil stocks to be +100,000 barrels for the week ending June 6, with gasoline stocks expected to be +1.2 million barrels and distillates +600,000. Refinery runs are expected to be -0.2% to 93.2%.
NATURAL GAS
July Natural Gas is lower this morning but inside the range of the past 3 ½ weeks. LSEG put average gas output in the lower 48 states at 105.2 billion cubic feet per day so far in June, the same as May, but this an increase from the rate earlier in the month. The 6-10 and 8-14 day forecasts show above normal temperatures covering most of the lower 48 from coast to coast, which points to a chance for increased gas consumption for electricity usage. There are some near or below normal in PNW and New England and near normal in the northern reaches of the lower 48, but above normal temperatures dominate the map. For the EIA storage report this week, the early Reuters poll of analysts has an range of expectations for US storage to be +96 to +112 bcf last week. The five-year average change for the week is +88. As of last week’s report, storage was -10.4% from a year ago but +4.1% from the five-year average.
PRODUCTS
July RBOB is following crude oil higher but is limited by the disappointing demand at the start of the summer driving season. Last week’s EIA report showed US implied gasoline demand for the week ending May 30 at 8.263 million barrels per day, the lowest since the Covid year 2020 after reaching an eight-month high the previous week. US crude, distillate, and gasoline stocks are all running below average, but the gasoline is the “least tight” of them all.
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