Written Commentary
CRUDE OIL
September Crude Oil was higher overnight in the wake of a bigger than expected decline in API stocks, but it had also fallen to a technically oversold level. Anonymous sources said API crude oil stocks fell 3.9 million barrels for the week ending July 19, with gasoline inventories down 2.8 million and distillates down 1.5 million. If these numbers are verified by the EIA report this morning, it would be the fourth straight weekly decline for crude stocks. For the report today, the trade is looking for a 2.5-million-barrel decline in crude stocks, with gasoline expected to be down 500,000 barrels and distillates up 30,000. Refinery runs are expected to be down 0.3% to 93.4%. As of last week, crude stocks were down 17.2 million barrels from a year ago and 21.6 million below the five-year average. Gasoline stocks were 3.3 million barrels above a year ago and 65,000 above the five-year average. Distillate stocks were 3.5 million above a year ago but 9.1 million below the five-year average. The market has been pressured this month by diminished demand expectations, from disappointing economic numbers out of China and a what appears to be a lackluster summer driving season in the US. Increased expectations for interest rate cuts in the US and EU provide some optimism. India’s crude oil imports fell to a four-month low in June. Efforts to reach a ceasefire between Israel and Hamas have gained momentum over the past month, which eases concerns about supply interruptions, However, a UNN Special Envoy warned of the danger of a regional escalation following new Iran-backed Houthi attacks on commercial shipping and the first Israeli airstrikes on Yemen in retaliation for Houthi drone and missile attacks.
PRODUCT MARKETS
Like crude oil, September RBOB found support at the 200-day moving average yesterday and 0.618 retracement levels this week, which are both right around 2.3816. The market closed below that line yesterday but was back above it overnight in the wake of the API number. Last week’s EIA report showed implied demand at 8.8 million barrels per day, down from 9.4 million the previous week and 9.4 million the week before that. A higher number this week could boost market sentiment.
NATURAL GAS
September Natural Gas was lower overnight after the market failed to follow through on its recent rally. A warmup is expected for the Lower 48, which should boost cooling demand, but supplies are still high relative to a year ago. For tomorrow’s weekly EIA US inventory report, traders are looking for an increase of 11-24 billion cubic feet for the week ending July 19. Last week’s report showed US supply was running 8.4% above a year ago and 16.9% above the five-year average as of July 12. This was a relative improvement from the +9.7% and +18.7% readings the previous week. The 8-14-day forecast shows above normal temperatures everywhere except for south Texas, with some extreme heat expected over the Plains and the Midwest. LNG shipments out of Freeport Texas are getting back to normal, which may help offset an increase in US supply.
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