Written Commentary
CRUDE OIL MARKET
The upward march in the crude oil market extends again today with several bullish fundamental themes. Obviously, the massive 10.6-million-barrel draw from EIA crude oil stocks and the strong decline in API crude oil stocks provides a very bullish supply foundation for the market. In fact, US oil inventories are at the lowest level of this year with Cushing Oklahoma supplies at the lowest level since January. It should also be noted that current EIA crude oil inventories are now 16 million barrels below the five-year average, and the year over year EIA crude oil surplus was cut by nearly 1/3rd versus last week.
PRODUCT MARKETS
In addition to lift from is drafting support from crude oil headlines residually strong European traffic patterns help support gasoline prices. However, for a second straight trading session, the product markets performed poorly relative to the action in crude oil prices and that indicates concern for slumping seasonal demand ahead and fear of a buildup of inventories from the seasonally high US refinery operating rate. However, this week’s implied gasoline demand reading held together perhaps because of supply positioning ahead of the upcoming US Labor Day holiday. Fortunately for the bull camp in gasoline, implied gasoline demand was the highest since early in the summer at 9.06 million barrels per day. EIA gasoline stocks fell 214,000 barrels and are 2.937 million barrels above last year and 11.455 million below the five-year average. Average total gasoline demand for the past four weeks was up 1.8% compared to last year.
NATURAL GAS
Not surprisingly, the natural gas trade continues to be uneventful as prices remain under an oppressive layer of supply in the US. Granted, the amount of surplus gas relative to 5-year average storage levels continues to inch lower but without that 10% surplus narrowing to low single digits, the gas market might not see noted gains from supply issues without a very early start to the northern hemisphere heating season. While the passage of Hurricane Idalia has pushed out long specs, the frequency of tropical wave development has increased which in turn should temper confidence in the bear camp. Expectations for this week’s injection into EIA working gas in storage is expected to be in the low double digits.
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