Written Commentary
CRUDE OIL
July Crude Oil extended its selloff overnight to trade to its lowest level since February 6. Traders worry about supply increasing later this year amid signs of weakening demand. OPEC+ on Sunday agreed to extend 3.66 million bpd of its output cuts that were set to expire at the end of 2024 to the end of 2025. They also agreed to extend a set of voluntary cuts (2.2 million bpd) that were to expire at the end of this month to the end of September. A Reuters survey released this morning showed OPEC output increased to 26.63 million barrels per day in May, up 145,000 from April. It showed exports by Nigeria and Iraq offset the impact of the voluntary cuts. US manufacturing activity slowing for a second straight month in May and construction spending falling for a second month in April have raised concerns about US demand. If the Factory Orders report for April due out this morning is disappointing, it could spark more selling. For the reports, a Reuters poll showed an average trade expectation for US crude oil stocks to be down 1.9 million barrels for the week ending May 31. Last week’s EIA report showed they were down 4.156 million barrels for the week and down 4.968 million from a year ago. Refinery runs are expected to be up 0.4% from last week.
NATURAL GAS
July Natural Gas extended yesterday’s rally overnight and traded to its highest level since last Wednesday. The market is still reacting to an outage affecting Norway’s gas exports to Britain. This lends support to US gas prices because it supports LNG export prospects. Norway replaced Russia as the biggest supplier to Europe after Russia invaded Ukraine. Repairs are expected to be completed by Friday, but overnight, Norway’s GASSCO increased its planned gas outage from 5.4 thousand cubic meters (MCM) per day as previously announced to 10.4 MCM/day for 0600 June 6 to 0600 June 7. They also announced an outage of 5.4 MCM/day a 24-hour period from 0400 June 7 to 0400 June 8. This week’s Reuters poll projects EIA natural gas in storage to see an injection within a range of 89 BCF to 91 BCF. Last week’s report showed an increase of 78 BCF from the previous week to 2,795. This was up from 2,415 a year ago.
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