Written Commentary
CRUDE OIL
August Crude Oil traded to its highest level since April 24 yesterday on a bullish EIA report and more-or-less held those gains overnight. The report showed US crude stocks fell 2.5 million barrels for the week ending June 20 versus expectations for 2.3 million barrel decline and in sharp contrast to reports that the API report on Tuesday showed an increase of 2.3 million. At 457.1 million barrels, stock are down 6.2 million from a year ago but 16.9 million above the five-year average. The refinery rate was 93.5% last week versus 95.0% the previous week. Imports decreased by 1.2 million barrels, and exports were up 2.2 million. Implied gasoline demand increased last week and was on par with a year ago, which provided some hope that the summer driving season will meet expectations. BofA is estimating that Saudi Arabia needs to see the price of oil reach nearly $95 to balance the budget this year. China’s oil apparent oil demand fell to 14.1 million barrels per day in May, down 3.3% from a year ago.
PRODUCT MARKETS
The EIA report showed US gasoline stocks fell 2.3 million barrels for the week ending June 14 versus expectations for a 1.5 million-barrel increase, and this sparked a rally in August RBOB to its highest level since May 29. Prices held their own overnight and came close to taking out yesterday’s high. At 231.2 million barrels, stocks are up 9.8 million from a year ago but are 3.5 million below the five-year average. Implied gasoline demand was 9.4 million barrels per day versus 9.0 million last week and 9.4 million a year ago. This is the highest they have been in at least five weeks. Distillate stocks fell 1.7 million last week, which was bullish against expectations for a 300,000 barrel decline. This puts total distillate stocks at 121.6 million barrels, which was up 7.4 million from a year ago and 10.9 million below the five-year average. August ULSD traded to its highest level since April 30 yesterday but closed well off its highs of the day. The market pushed lower overnight but climbed back near unchanged.
NATURAL GAS
August Natural Gas had an outside day lower yesterday, as the market has apparently lost interest in the heatwave in the US. The market extended its losses slightly overnight but will likely be reluctant to push too much lower until the weekly US EIA storage report is released later this morning. The EIA report is expected to show a net injection of 66-80 bcf for the week ending June 14 versus +74 bcf the previous week and +92 bcf a year ago. Storage is ample. In last week ’s report, total storage was 2,974 bcf versus 2,520 a year ago and a five-year average of 2,312. EU countries agreed on a 14th package of sanctions against Russia over the Ukraine war, this one includes a ban on re-exports of Russian LNG in EU waters but does not ban imports as the bloc did in 2022 for Russian seaborne oil. Gas market experts say this will have little impact because trans-shipments of Russian LNG represent only around 10% of total Russian LNG exports. The extended US weather forecast still point to above normal temperatures across most of the lower 48 states, with the exception of the PNW, northern Wisconsin and northern Michigan. Much above normal temperatures are centered around a broad area covering the mid to lower Midwest and most of the South.
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