Written Commentary
CRUDE OIL
October Crude Oil was higher early Tuesday and was close to taking out the July 23 high. Renewed hostilities between Iran and the US this week have reignited concerns about global supply and put hopes for some sort of agreement to reopen the Strait of Hormuz aside. Two supertankers carrying Saudi oil were reportedly struck by unknown projectiles within minutes of each other while transiting out of the strait late Monday. The depletion of the US strategic petroleum reserve is also on traders’ minds. The SPR is expected to fall to about 243 million barrels if the US releases the final batch of 39 million barrels announced in March as part of an agreement with the International Energy Agency. This does not leave much of a cushion for further releases should they be needed. There have also been reports that if the US SPR gets too low, it will compromise the salt caverns where the oil is stored. The White House on Monday released terms of the US-Venezuela oil deal with North American Blue Energy Partners. Part of that would include oil to refill the SPR, but that will take time.
PRODUCTS
October RBOB and October ULSD both traded to new contract highs early Tuesday, as the deterioration in peace prospects in the Middle East and ongoing fighting in Ukraine is more acutely felt in the products. Reuters reports that Russia imported nearly 460,000 metric tons of motor fuels in August. Around 370,000 tons consisted of gasoline from India, Turkey and Morocco shipped to Russian Baltic and Arctic ports.
NATURAL GAS
October Natural Gas was lower early Tuesday after failing to take out Monday’s high. The market appears to be trying to put in a low, with a series of slightly higher highs and slightly higher lows since putting in a contract low in early August. Weather continues to trend hotter than normal, which helps support cooling demand against record US production. Flows to LNG export plants appear to be firming up as maintenance gets completed, and this also helps increase offtake.
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