Written Commentary
CRUDE OIL
Yesterday’s EIA report was mixed, with crude oil stocks declining less than expected for the week ending August 23 but gasoline stocks falling more than expected. October crude oil closed lower for the second straight session yesterday, but it was higher overnight, as the threat of supply disruption in Libya offers support. At 425.1 million barrels, US crude stocks are above year ago levels for the first time since late June, but gasoline stocks are the lowest they have been this year and are close to year-ago levels. Implied gasoline demand is robust. The latest estimates have the Libyan production estimate affecting 900,000 to 1 million barrels per day. A dispute between the eastern and western factions of the government over control of the central bank of Libya has moved the eastern faction to shutter oil fields. The expected increases in OPEC+ production this fall look less threatening to prices if the Libyan crisis proves intractable.
EIA report highlights:
- Crude Oil stocks -0.8 million barrels from last week versus -2.3 million expected.
- Gasoline stocks -2.2 million barrels vs -1.6 million expected.
- Distillate stocks +0.3 million barrels vs -1.1 million expected.
- Refineries +1.0% to 93.3% versus +0.2% to 92.5% expected.
- Crude oil imports 6.560 million barrels per day vs 6.652 million the previous week.
- Crude exports 3.671 million bpd vs 4.045 million the previous week.
- Net imports 2.889 million bpd vs 2.607 million the previous week.
- Implied gasoline demand 9.307 million bpd vs 9.193 million the previous week and 9.068 million a year ago.
US crude stocks are above year ago levels, but US demand potential looks promising with the anticipated cut in US interest rates.
PRODUCT MARKETS
October RBOB fell to its lowest level in a week overnight despite a supportive EIA report yesterday that showed a larger than expected decline in US stocks last week and robust consumption. At 218.4 million barrels, US gasoline stocks are the lowest so far for the year but are still above 217.4 million from a year ago and are the highest for this point in the season since 2021. At 9.307 million barrels per day, implied gasoline demand was the strongest since July 19, but the peak summer driving season is passing. Support for October RBOB comes in at the August 21 low at 2.0298, followed by 2.0099, with resistance at 2.089 and 2.1413. October ULSD traded to its lowest level since June 12, 2023 overnight but was back higher on the day later in the session. At 123.1 million barrels, US distillate stocks are above the 117.9 million from a year ago but below the five-year average of 136.7 million. Lower interest rates in the US could boost diesel usage, but Chinese demand is still a concern.
NATURAL GAS
October Natural Gas was lower overnight but held above yesterday’s low. The market appears to be heading towards a test of the contract low from August 5, as large US supply is still a burden. World Weather Service says the US will be warmer than normal most often through the next two weeks with notable areas of colder than normal temperatures starting next week. This does not leave much for the bulls to cling to, especially with that cooler weather showing up. For today’s weekly EIA inventory report, 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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