Written Commentary
CRUDE OIL
August Crude Oil’s failure to takeout is April high yesterday may have traders thinking the market has rallied too far too fast. Fears about supply disruptions being caused by Hurricane Beryl faded on Tuesday, as the storm is expected to weaken by the time it crosses into the Gulf of Mexico, posing less of a threat to oil infrastructure in Mexico. The API report yesterday reportedly came in at the bullish end expectations for crude oil and bearish for gasoline, but the market will likely reserve judgment until the EIA report is released this morning. OPEC’s oil output increased for the second straight month in June, as higher supply from Nigeria offset voluntary cuts by other members and by OPEC+. Output reached 26.7 million barrels per day, up 70,000 from May, according to a Reuters survey. Nigeria raised output by 50,000 bpd, and there were smaller increases by Iran and Algeria, as maintenance work was completed. Production was about 280,000 bpd above the implied target for the nine members. The trade is gearing up for a record travel week, and the AAA is forecasting a 5.2% increase in overall travel from last year, with a 4.8% increase in car travel.
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PRODUCT MARKETS
August RBOB also showed a bit of exhaustion yesterday after seeing a rally off anticipated strong demand for the holiday weekend. This is being touted as the “peak demand” weekend of the year, and that and an overbought technical condition may have sparked some profit-taking. It may not have helped that the API report apparently showed a surprise increase in US gasoline stocks last week, but the market will likely reserve judgement until the EIA report is released this morning. The Reuters poll is calling for US gasoline stocks to be down 1.3 million barrels in this week’s inventory reports, and distillate stocks are expected to be down 1.2 million barrels.
NATURAL GAS
August Natural Gas has fallen back inside an heavy consolidation pattern that lasted from mid-March to early May, and the bottom of that range, around 2.45 could be a strong support level. The weather forecast has turned cooler overnight for the nation’s mid-section, which limits cooling demand expectations. The 6-10 day forecast now has a broad swath of lower than normal temperatures across the plains and the Midwest, with much above normal in the west and along the East Coast. A federal judge blocked the Biden Administration from continuing to pause the approval of applications to export LNG, which improves the long term outlook for exports. Texas governor Greg Abbot and Lt. Governor Dan Patrick said they will seek to expand the Texas Energy Fund program to build more gas plants to meet the state’s growing needs for electricity. LSEG said gas output in the lower 48 states have risen to an average of 101.5 billion cubic feet per day so far in July, up from 101.1 in June and up off the 17-mionth low of 99.5 in May.
The EIA natural gas storage report will be released today because of the holiday tomorrow. The Reuters poll calls for a gain of 22-35 bcf last week. Last week’s report showed US working gas in storage was 3,097 bcf versus 2,783 a year ago and a five year average of 2,569.
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