Written Commentary
CRUDE OIL
While the global macroeconomic outlook improved with a clear softening of US consumer prices yesterday that news also improved energy demand expectations. However, a 2nd straight week of large EIA crude oil stock builds, the highest EIA crude stocks tally since December 2021, US crude oil production reaching a new high for the move and with US crude oil exports down 1.4 million barrels per day that should have been enough information to leave control with the bear camp. However, the International Energy Agency overnight has raised its petroleum demand outlook because of fuel switching from ultrahigh priced/difficult to supply natural gas. The IEA raised demand estimates by 380,000 barrels per day for the remainder of this year.
With the EIA report producing supportive gasoline stocks news with a larger than expected weekly draw in gasoline stocks of nearly
5 million barrels and a doubling of the gasoline stocks deficit and given a 582,000 barrel per day increase in US implied gasoline demand (to a rate of 9.1 million barrels) the gasoline market is likely to become the leadership market on rallies and will lag on energy complex weakness. In another positive development, the EIA report showed the highest US gasoline exports since December 2018.
NATURAL GAS
With a clear moderation of US area under extreme heat in forecasts out beyond midmonth, aggressive efforts in Europe to reduce consumption and less bullish sentiment flowing from the petroleum complex yesterday, the bear camp should have regained control, but they clearly have not! Looking ahead to the EIA working gas in storage report today, some traders need to see a smaller than expected injection and an expansion of the US inventory deficit to five-year average storage levels to see fresh buying off the report.
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