Written Commentary
CRUDE OIL
The rally in August Crude Oil has stalled over the past week, and it could set back if the US EIA report this morning comes in bearish. For the report, trade expectations are calling for a 3 million-barrel draw in US crude inventories for the week ending June 21. Last night’s API report reportedly showed an increase of 914,000 barrels, but it is not unusual for the two numbers to contradict. Gasoline supply expected to be down 1.1 million from last week and distillates up 400,000. Refinery runs are expected to be steady at 93.5%. At 457.1 million barrels, US crude stocks are close year ago and five year average levels. The trade has been banking on strong gasoline demand this summer, and the market may be particularly sensitive to any disappointment on implied gasoline demand. There could also be some reaction to the US PCE (the Fed’s “favorite” inflation indicator) this Friday, as a hot number would raise concerns that the Fed would not cut rates this year (and vice-versa if the number comes in cool). The ship tracking firm Kpler says the US imported 3.1 million barrels per day in May, the highest since July 2022. So far this month imports have averaged 2.9 million bpd. A spokesman for the Houthis said yesterday that they used a new ballistic missile to hit the MSC Sarah V vessel in the Arabian Sea this week. Official maritime sources for the region said the ship was not hit and that it was heading to the next port of call.
PRODUCT MARKETS
August RBOB is seeing some consolidation ahead of the weekly EIA inventory reports. The market is anticipating another 1.1 million barrel decline this week and would probably appreciate another strong showing on the implied demand front after last week’s 9.386 million barrels per day beat year-ago levels and was the highest in at least five weeks. Gasoline stocks last week were 4.1% above a year ago and 1.4% below the five-year average. The trade is looking for a 400,000-barrel increase in US distillate stocks after last week’s surprise 1.7 million-barrel decline. Stocks last week were 6.5 % above a year ago and 8.2% below the five-year average.
NATURAL GAS
The heatwave in the US may provide underlying support to the natural gas market, but supplies are ample relative to a year ago and the five-year average. The 6-10 day forecast shows the heat concentrated in the southeastern quadrant of the lower 48, with normal temps across the New England, the northern Midwest, and Plains and below normal in the PNW. The 8-14 day shows the heat expanding northward into New England and the northern Midwest. This week’s EIA report natural gas storage 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. The International Gas Union says the global LNG market has a new found, fragile equilibrium after two years of volatility. Global LNG trade reached a record level of 401.42 million metric tons in 2023, up 2.1% (8.4 million tons) from 2022. This was down from 5.6% growth in 2022. The US remained the top exporter at 85.4 million tons, up 8.9 million from 2022. China was the world’s top importer at 71.21 million.
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