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Petroleum Markets Vulnerable

CRUDE OIL

While the crude oil market has seen supportive news over the last 24 hours from IEA predictions that global energy demand will continue to pick up, and the removal of fear of a backup of US supply from a rail strike, the market has also seen many projections of deteriorating demand (especially from Asia with September imports running slow).  Fortunately for the bull camp Asian demand might be set to improve in the 2nd half of September with a significant pickup in Asian refinery buying noted overnight.  Unfortunately for the bull camp, yesterday also produced negative demand news with the International Energy Agency indicating China is likely to post its largest yearly decline in energy demand.  This week’s Reuters poll projects EIA gasoline inventories to decline by 900,000 barrels per day, but the API yesterday saw its inventory levels decline by a very notable 3.23 million barrels. However, to avoid a 2nd straight week of EIA surplus gasoline supply readings (relative to year ago levels) might require a much larger than expected outflow of EIA supply.

gas pump dusk

NATURAL GAS

Not surprisingly, natural gas prices overnight fell back after the significant range up move yesterday. Fortunately for the bull camp, the natural gas market likely remains net spec and fund short, US natural gas consumption forecasts from the EIA predict record readings this year and it appears that the EU has scrapped plans for a gas price Cap. Just as a FYI it should be noted that Asian gas prices overnight were $40 and European prices are roughly $34. Into today’s action several bullish fundamental forces are in place with a tropical depression in the Atlantic becoming a named storm (Fiona) and two other storms potentially becoming named tropical storms.

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