Written Commentary
NATURAL GAS
September Natural Gas is lower today after its failure yesterday to push through Tuesday’s seven-month highs. The market appears to have absorbed the prospects of higher cooling demand as a heat wave settles in across the US. The 6-10 forecast has above normal temperatures across the eastern two-thirds of the US, with the area of coverage expanding in the 8-14-day to all but the northwestern corner. This weekend, maximum temperatures are expected to reach the 90s in a line running from eastern Colorado, across to southern Wisconsin and Michigan and east to New Jersey. But normal to above normal chances of rain in the extended forecast could mitigate some of those effects. Federal regulators approved the startup of the Mountain Valley Pipeline from West Virginia to Virginia this week, which is expected to allow Appalachian producers to start to slowly build output. For the EIA inventory report today, the trade is looking for a modest injection of 74 bcf for the week ending June 7 versus an injection of 98 bcf the previous week and 84 the week before that. As of last week’s report, working gas in storage was 2,893 bcf, up from 2,520 that time last year and above the five year average of 2.312. Gas output in the lower 48 has fallen to an average of 97.7 bcf/day in June, down from 98.1 in May.
CRUDE OIL
August Crude Oil is lower this morning, which could be follow-through from yesterday’s EIA report that showed a surprise increase in US crude stocks for the second week in a row. The market saw an rally ahead of the EIA numbers off a lower than expected US CPI that seemed to open the door for a Fed rate cut in September, but the Fed Chair’s comments in the afternoon seemed to push that possibility back to December. The PPI number this morning will offer the next fuel to the inflation/interest rate fire. In the EIA report yesterday, US crude inventories came in at 459.65 million barrels for the week ending June 7, up 3.73 million from the previous week versus expectations are calling for decline of 1.03 million barrels. Stocks are down 7.5 million from a year ago and are 17.0 million below the five-year average. Refinery runs came in at 95.0% of capacity, which was below expectations for 95.1% and down from 95.4% last week. Imports increased to 8.3 million barrels per day last week versus 7.1 million the previous week and were the highest since August 2019. Exports fell to 3.2 million from 4.5 the previous week. Yesterday, IEA lowered its oil demand growth forecast for 2024 by 100,000 bpd to +960,000, citing sluggish consumption in developed countries. IEA also said that it expects global oil demand to peak at 105.6 million barrels per day by 2029, which was in contrast to OPEC’s expectations for demand continue to grow long after 2029. IEA sees supply capacity reaching nearly 114 million bpd by 2020, 8 million above demand.
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