Written Commentary
CRUDE OIL
Despite divergences in the way they expect global oil demand to move in 2024, IEA, EIA, and OPEC all called for a reduction in global inventories by the end of the year, and this has allowed August Crude il to extend its rally overnight. The API report yesterday apparently showed US crude inventories falling more than expected last week, which reinforced the bullish expectations, and the trade will be looking to the EIA report this morning for verification. Refinery runs are expected to drop to 95.1% of capacity versus 95.4% in last week’s report.
In a report today, IEA lowered its oil demand growth forecast for 2024 by 100,000 bpd to +960,000, citing sluggish consumption in developed countries. OPEC yesterday said it was looking for demand to grow by 2.25 million bpd in 2024 and 1.85 million in 2025. EIA said yesterday that it expects world crude and liquid fuels consumption to increase by 1.1 million bpd versus a previous forecast of +900,000. EIA is also looking for US production to increase to 13.24 million bpd this year, up from 13.16 million in their May forecast and up from 12.93 million in 2023. IEA said that it expects global oil demand to peak at 105.6 million barrels per day by 2029, which was in contrast to OPEC’s report yesterday that called for demand to continue to expand long after 2029. IEA sees supply capacity reaching nearly 114 million bpd by 2020, 8 million above projected demand.
A hot CPI number this morning and/or hawkish commentary from the Fed this afternoon could limit gains in crude oil. The Fed is not expected to change raise rates, but it will release its latest economic projections.
NATURAL GAS
July Natural Gas traded very close to the May 23 high yesterday, and that level could offer a key resistance area today, as the market is looking at stronger cooling demand over the next few weeks. The 6-10 forecast has above normal temperatures across the eastern two-thirds of the US and that area expanding across to all but the northwestern corner in the 8-14-day. This weekend, maximum temperatures are expected to reach the 90s in a line running from eastern Colorado, across to southern Wisconsin and Michigan and east to New Jersey.
The EIA Short Term Energy Outlook yesterday projected daily US gas production to fall from the record 103.8 billion cubic feet per day in 2023 to 102.1 in 2024, as several drillers are reducing activity after gas prices fell to three-year lows earlier this year. This was down from a May forecast of 103 bcfd. They look for 2025 output to increase to 104.4 bcfd versus 104.8 estimated in May. They also look for domestic gas consumption rise from 89.1 bcfd in 2023 (a record) to 89.4 in 2024 and 89.9 in 2025. This is up from previous forecasts of 89.3 for 2024 and 89.6 in 2025.
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