Written Commentary
CRUDE OIL
September Crude Oil is higher this morning but inside yesterday range. Increased hostilities in the Mideast this week may be adding a bit of supply concern. Israel launched airstrikes against Damascus yesterday, blowing up part of the defense ministry and hitting near the presidential palace. More pressing were the drone attacks reported on oilfields in the Kurdistan region of Iraq for the third straight day. They have reportedly cut crude output from the region by 140,000 to 150,000 barrels per day. No one has claimed responsibility. Yesterday’s EIA report was bullish for crude oil, with stocks declining 3.9 million barrels last week versus -600,000 expected. However, gasoline and distillate stocks both increased more than expected despite a larger than expected decline in refinery activity. Crude oil imports increased roughly 366,000 barrels per day, but exports increased 761,000, resulting in a net decline in net imports of 395,00 bpd. Implied gasoline demand was down 670,000 bpd from the previous week down 294,000 from a year ago. The trade is awaiting news of a possible trade deal with Beijing on illicit drugs as well as an agreement with the European Union, which could ease concerns about demand.
NATURAL GAS
September Natural Gas extended its recovery rally overnight to reach its highest level since June 30. The weather forecast continues to lean hot over the next couple of weeks. The 6-10 and 8-14 day forecasts call for above normal temperatures across most of the US lower 48 states, except for some cooler than normal west of the Rockies. The cooler area has expanded from yesterday in the 6-10 day, but it diminishes in the 8-14 day. For today’s EIA storage report, the Reuters poll has an average expectation calling for a net injection 46 bcf for the week ending July 11 (range +38 to +53). The five-year average change for the week is +37 bcf. An LNG vessel targeted by US sanctions docked at Russia’s Arctic LNG 2 plant this week, the second sanctioned ship to stop at the plant so far this year, according to Reuters, which cited tracking data from LSEG and Kpler. This could indicate that loadings at Arctic LNG 2 have resumed. That terminal is also subject to the Western sanctions.
PRODUCTS
The EIA report US gasoline stocks were +3.4 million barrels last week versus an average expectation of -1 million. Distillates were +4.2 million +200,000 expected. Implied gasoline demand totaled 8.489 million barrels per day last week, down from 9.159 million the previous week and 8.783 million a year ago. This was the lowest for this week in at least six years. The four-week average demand is on par with the four-year average.
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