Written Commentary
CRUDE OIL
The crude oil market starts the last trading session of the week under pressure as the environment this morning presents more risk off than risk on factors. However, from a technical perspective, the crude oil market remains within a definitive downtrend from the June high and has apparently reentered a secondary bear phase with the late July high projecting the top in the market to be near $90.50 in the September crude oil contract ahead. While economic evidence has not been definitive the trade continues to hold positive views toward the status of energy demand. Signs of solid demand for oil in China were also documented from rising crude stockpiles held by the national oil company and because of significant expansion in seaborne crude oil imports this month.
Both product markets were able maintain upside momentum on Thursday and while ULSD reached a 3-week high, RBOB was the strongest member of the energy complex. The latest EIA report showed an 8-month low in US gasoline stocks, despite a second week in a row with implied gasoline demand above 9 million bpd. After falling more than $1.10 a gallon from mid-June, average retail “pump” prices have stayed within a tight range over the past week, which may indicate they are closing in on a longer-term low. China’s gasoline exports last month were 19% above last year’s total, which provided a boost to Asian near-term demand prospects and supported energy prices on Thursday.
NATURAL GAS
Natural gas prices remain on track for a second sizable weekly gain in a row, but recent market action may be setting the stage for a week-ending pullback. October natural gas gave up sizable early gains and came under significant pressure as it finished Thursday’s trading session with a moderate loss. The latest EIA storage report showed a much lower than expected net injection that was nearly half the size of trade forecasts, and far below last year’s reading and the 5-year average. While gas storage remains well below average for this time of the year and power plant demand should see an uptick next week, US gas production remains close to record high levels while the Freeport terminal shutdown continues to restrict US LNG exports.
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