Written Commentary
CRUDE OIL
October Crude Oil is near unchanged this morning following a rally yesterday off a supportive EIA stocks reports. The market did fall under some pressure overnight on reports that India will continue to buy Russian crude oil despite the 50% tariffs imposed on the by the US. India is treading a fine line. It needs cheap Russian crude, but it also needs access to US markets. Sources told Reuters that Indian refiners would increase Russian oil purchases in September by 10-20% from August. This is after they cut back purchases in August as they were negotiating with the US over the tariff rates. Russian oil supplies through the Druzhba pipeline to Slovakia have resumed after an outage caused last week by a Ukrainian attack. There are also reports that Saudi Arabia may cut October crude oil prices for Asian buyers amid ample supply. The EIA report yesterday was supportive for crude, with crude oil stocks falling more than expected for the week ending August 22. Refinery runs were the lowest in 10 weeks, but they were still the highest for this point in the year in at least six years.
NATURAL GAS
The natural gas market has managed a bounce this week after falling to its lowest level in nine months. US production continues at a record pace. The weather forecasts call for cooler temps in the eastern 2/3 of the US, which limits any late season cooling demand. The Reuters poll for the US storage report week has expectations for US natural gas storage to be +26 for the week ended August 22, with a range of expectations of +19 to +38 bcf. This would be below the five-year average change for the week of +40 bcf. Weekly storage growth has been below the five-year average only two times since the end of June, and both of those occurred within the last three weeks.
PRODUCTS
The EIA report yesterday was supportive for diesel and slightly bearish for gasoline, with distillate stocks falling instead of increasing as expected and gasoline stocks falling less than expected. Implied gasoline demand was up from the previous week ahead of Labor Day travel but down from a year ago. Bloomberg noted the decline in refinery runs points to a start of fall turnaround season and the seasonal slowdown after peak summer travel season.
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