Written Commentary
CRUDE OIL
July Crude Oil was lower early Friday as there was no updates on peace talks between the US and Iran but there were no reports of escalation either. Oil industry execs and analysts have been sounding the alarm over the impending shortages as existing storage is drained. The US SPR stands at 357.119 million barrels, -57.9 million since the end of March (-14%). This is the lowest it has been since early 2024, after being drawn down in response to the Ukraine war. Crude oil stocks (excluding SPR) are at 433.172 million, down 27.9 million (-6%). There are also stories about how oil is still making its way out of the Gulf and that producers in the region are investing heavily in alternate distribution channels, such as pipelines to the Red Sea, Gulf of Oman, or the Mediterranean. However, the flows through the Strait of Hormuz are a mere fraction of what they were before the war, and the alternate distribution investments will take some time to develop.
PRODUCTS
Product prices were steady to higher early Friday in line with crude oil. The EIA report this week showed increases in gasoline and distillate stocks, but they remain near six year lows.
NATURAL GAS
July Natural Gas was lower early Friday following a rally this week that took the market back to the June 1 highs. Warm weather and a slowdown in US production have tightened the supply/demand balance to a degree. The weekly EIA gas storage report on Thursday showed a smaller than expected (and smaller than average) build last week, with storage up 95 bcf for the week ending May 29 versus an average trade expectation of +101 and a five-year average change for the week of +104. Storage was +0.8% from a year ago and +4.3% above the five-year average versus +0.3% and +4.8% the previous week.
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