Written Commentary
CRUDE OIL
Worries that the Israel-Hamas war could spread into a war with Hezbollah in Lebanon are supporting crude oil markets despite a despite a bearish weekly EIA stocks report yesterday that had US crude and gasoline stocks coming in bearish. In the report, US crude oil stocks increased 3.6 million barrels for the week ending June 21 versus expectations for a 3 million-barrel decline. Gasoline stocks were up 2.7 million versus -1.1 million expected, and distillate stocks were down 400,000 barrels versus +300,000 expected. Refineries ran at 92.2% of capacity versus 93.5% expected. Crude imports fell to 6.6 million bpd vs 7.1 the previous week (down 500,000), and exports were 3.9 versus 4.4 previously (also down 500,00), so the net effect was zero. Crude oil stocks climbed above year ago levels for the first time since mid-May and for only the third time this year. They are only 6 million barrels below the five-year average. This is a time of year when they usually decrease. Stocks at Cushing, Oklahoma fell 0.2 million barrels on the week. They are down a 9.3 million from last year and 6.9 million below the five-year average. Next up is the US PCE tomorrow, and a “hot” number could raise concerns that the Fed would not cut rates this year, which could pressure demand ideas.
PRODUCT MARKETS
Like crude oil, the product markets are drawing support from geopolitical concerns now that the EIA report has come and gone. Gasoline stocks increased by 2.7 million barrels last week, which was bearish against expectations for a 1.1 million-barrel draw. Implied gasoline came in at demand 9.0 million bpd versus 9.4 million the previous week and 9.3 million a year ago. The trade is counting on strong demand this summer, and the higher than expected stocks may raise concerns. At 233.9 million barrels, US gasoline stocks are 2.7 million barrels above a year ago and a mere 300,000 below the five year average. Distillate stocks fell 400,000 barrels last week versus expectations for an increase of 300,000. Stocks are 6.9 million barrels above a year ago but 11.7 million below the five-year average.
NATURAL GAS
August Natural Gas has sold off steadily since putting in at high on June 11 despite a heat wave that has moved across the US. The northern third of the nation is expected to see closer to normal temperatures over the next week, above normal temperatures are expected to prevail south of there, with intense heat centered around the old South. Today’s EIA natural gas storage report is expected to show a net injection of 32-55 bcf for the week ending June 21. At 3,045 bcf in last week’s report, storage was 12.6% above a year ago and 22.6% above the five-year average, which leave some cushion against a surge in usage from the hot weather.
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