Written Commentary
CRUDE OIL
The huge selloff from last Monday’s high has left a wide range for the market to consolidate inside of. OPEC+ is expected to lift its production quota by another 411,000 barrels per day (bpd) in August after similar increases in May, June and July, according to what four sources inside the group told Reuters. This would put the total increase in the quotas this year to 1.78 million bpd. However, OPEC+ production has not increased as fast at the restrictions have been lifted, as some members were already overproducing, and this has limited the impact that the increased have had on global supply. Reuters reported that data on Thursday showed that independently held gasoil stocks at the Amsterdam-Rotterdam-Antwerp (ARA) refining and storage hub fell to their lowest in over a year. The Baker Hughes rig count showed US oil rigs in operation were down 6 rigs to 432 last week. This was down from 479 rigs a year ago and below the five-year average of 437. And EIA data shows US crude oil stocks are the lowest they have been for this point in the season in at least six years.
NATURAL GAS
August Natural Gas is sharply lower this morning following a two-day rally off a two-month low and nearly a six-month low. The 6-10 and 8-14 day forecasts have turned warmer since Friday, with a most of the lower 48 states looking at above normal temperatures, and this could help elevate summer cooling demand. The southwestern US and southern California are showing below normal temps in the 6-10-day. Last week showed another larger than normal increase in US gas supply, as so far the weather has not put much of a dent in storage levels. Storage was down -6.6% from a year ago and 6.1% above the five-year average. The Baker Hughes rig count showed US natural gas rigs in operation were down 2 rigs to 109 last week. This was up from 97 rigs a year ago and below the five-year average of 110. Reports that US energy companies are looking a opportunities to build natural gas pipelines to tap into Appalachia shale formations in Pennsylvania, Ohio and West Virginia, suggest a long term increase in supply potential, but they also indicate those companies are optimistic about demand. Data from Kpler indicates that China’s LNG imports are expected to total 5 million metric tons for June, which would be down 12% from a year ago. This would be the eighth straight month that imports were behind year-ago levels. Cheaper piped gas from Russia and Central Asia may have limited the needs for LNG, but a slowing Chinese economy may have also played a part.
PRODUCTS
Like Crude Oil, the huge ranges in ROB and ULSD last week have a wide area for the markets to consolidate inside following key reversal tops last Monday.
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