Written Commentary
CRUDE OIL
September Crude Oil sold off sharply overnight on the news that OPEC+ had agreed to lift its quotas another 548,000 barrels per day in August, but the market is back near unchanged this morning. The increase in production was higher than expected and was above the 411,000 bpd increases that OPEC had announced for May, June and July. There is talk this morning that they are considering a 550,000 bpd increase in September, which would amount to a complete unwinding of the 2.17 million bpd cuts. This shows a willingness on the group’s part to accept lower prices for larger market share and to put pressure on US production. The strong performance of the stock markets and the better than expected jobs number last week are supportive to demand. US crude and distillate stocks are low as well.
NATURAL GAS
September Natural Gas fell to its lowest level since December overnight. The NWS forecasts call for above normal temperatures to continue over the lower 48 states over the next two weeks, which should help boost demand and slow the expansion of US supply. However, the trade may be turning less bullish on LNG demand after South Korea’s new trade minister said on Friday that he might request an extension of the freeze on US tariffs that is set to expire within days when he heads to Washington for talks with U.S. officials. South Korea had expressed interest in a LNG project in Alaska, but Yeo said the feasibility of the project was still not clear and the U.S. would only provide more information later in the year. LSEG reports that US LNG exports in June fell to 8.4 million metric tons from 8.9 million in May, the second lowest since the start of the year. Thursday’s EIA storage report come in close to expectations at +55 bcf from the previous week versus a five-year average change of +.62 bcf. Storage was down 5.8% from a year ago and 5.8% above the five-year average versus -6.6% and +6.1% the previous week.
PRODUCTS
Both of the product markets are higher this morning after seeing off on the OPEC+ news, and unlike crude oil, both have managed to push through last week’s highs. August RBOB is the strongest of the complex for a change, but perhaps it is due after losing so much ground to ULSD.
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