Written Commentary
CRUDE OIL
June Crude Oil is higher this morning on apparent optimism that the trade talks between the US and China this weekend will yield some positive results and on an anticipated trade announcement with the UK. The fact that the crude oil market was able to withstand OPEC+’s announcement over the weekend that they would increase production another 411,000 barrels per day June is viewed as supportive. Some are taking the view that Saudi Arabia sees the market as able to absorb the extra supply because it expects a seasonal increase in demand in the third quarter. However, Kazakhstan’s oil production, including condensate, rose by 6.5% in April from March, according to the Russian news agency Interfax, and it has been also reported that Kazakhstan’s flouting of the quotas has angered the Saudis and has driven the move on the part of OPEC+ to aggressively lift the quotas. The EIA report yesterday was bullish against expectations for crude oil, bearish for gasoline, and neutral for diesel. Gasoline stocks increased slightly, with an increase in refinery runs and a drop in implied gasoline demand. Crude stocks fell more than expected but not as much as the 4.5 million-barrel drop in the API report. Crude oil, distillate, and gasoline stocks are all below year ago and five-year average levels. US jet fuel product implied demand reached 2.02 million barrels per day, the highest since December 2019.
NATURAL GAS
July Natural Gas is higher this morning and is close to taking out this week’s lows. A mixed weather outlook for the US suggests the possibility for late season heating demand in the west and perhaps some early season cooling demand in the east. The market also drew support from reports that the Trump administration was going to announce a trade deal with the UK today. The Reuters poll for the EIA gas storage report today has an average expectation calling for +101 bcf for the week ending May 2, with a range of expectations of +96 to +107. The five-year average change is +82 bcf for the week. LSEG data indicated there were 63 total degree days last week, compared with the 30-year normal of 70 for the period. The group also said average gas output in the Lower 48 US states fell to 103.4 billion cubic feet per day so far in May, down from a monthly record of 105.8 bcfd in April. They also said that the average amount of gas flowing to the eight big LNG export plants operating in the US fell to 14.8 bcfd so far in May from a record 16.0 bcfd for the month of April.
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