Written Commentary
NATURAL GAS
Not surprisingly, natural gas prices continue to slide, which clearly highlights the market’s complete lack of concern for significant cooling consumption and tightening supply. It should also be noted that the Aussie strike has been averted, which adds a fresh negative to the equation. Apparently, the trade expects softer export figures with supply possibly backing up because Atlantic tropical depression activity has virtually exploding over the last week. This week’s Reuters poll projects EIA working gas in storage to post an injection between 27 and 35 BCF and with seasonably hot temperatures, the odds of a smallish injection should be good. However, if the injection is moderate in the face of prime cooling demand timing that could result in a sharp extension of this week’s downside failure. In a longer-term bullish development, Russia indicated its natural gas output in July declined by 6.7% versus year ago levels.
CRUDE OILWhile evidence of tight US crude oil stocks failed to support prices earlier this week that situation reportedly played a large role in the reversal yesterday. Certainly, seeing US crude oil inventories fall to the lowest level of 2023, a six-year seasonal low in global oil inventories and going optimism flowing from equities helped crude oil halt the washout. However, several bearish forces hang in the marketplace with expectations of increased Nigerian exports and negative technical signals from WTI spread pricing. Perhaps most importantly, the US Oil Fund ETF saw the largest outflow since 2020, while ARA crude oil stocks increased over the last week and there is an effort to ease Venezuelan oil sanctions. Apparently, the washout was partly inspired by “anticipation” of softer global demand given weak manufacturing data around the world. However, the trade did see negative supply information yesterday following EIA data showing US weekly production of crude oil jumping to the highest level since March 2020. Fortunately for the bull camp, the US refinery operating rate remains very high at 94.5% keeping demand for crude feedstocks high. EIA crude stocks fell 6.134 million barrels and are 11.856 million barrels above year ago levels. Also, crude stocks stand 9.633 million barrels below the five-year average.
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