Written Commentary
CRUDE OIL
OPEC+ agreed on Sunday to increase oil production another 547,000 barrels per day for September, as expected. This brings the total quota lifting to 2.5 million bpd since the beginning of the year, although the increase in production is closer to 1.7 million bpd because some members have cut output after previously overproducing. The group is scheduled to meet again on September 7, and there is talk they may reverse another layer of output cuts of roughly 1.65 million bpd, which are currently in place through the end of the year. The fact that production increases have not led to a collapse in oil prices has led some to suspect stronger demand from China, but some also suspect this is due to stock building. The Trump administration last week has threatened to impose 100% secondary tariffs on buyers of Russian crude to try to pressure Russia into ending the war with Ukraine. At least two ships carrying Russian oil to India have been diverted to other destination, and there were reports that the Indian Oil Corp has purchased 7 million barrels of September-arrival crude from the United States (4.5 million), Canada (500,000) and Abu Dhabi (2 million). India is the world’s third-largest oil importer and has been the biggest buyer of seaborne Russian crude.
NATURAL GAS
September Natural Gas has managed to hold Thursday’s three-year lows on Friday, but it is approaching that low this morning. The Baker Hughes gas rig count showed US rigs in operation up 2 to 124 last week. This was up from 98 rigs a year ago and above the five-year average of 112. The number of gas rigs in operation has increased for three straight weeks and is up 16 rigs since July 11. However, overall rigs in operation (oil and gas combined) are down 47 since April 25. The tariff agreement with Malaysia includes a 19% tariff starting August 8, which is better than the 25% threatened last month, and as part of the deal, the Malaysian state energy firm will buy $3.4 billion per year of US LNG. Several of the agreements worked out so far have included deals to buy LNG. The 6-10 day forecast has above normal temperatures across most of the lower 48, except for some below normal temps in the northern Rockies and some near normal in a section of the southeastern US centered around Georgia.
PRODUCTS
September RROB is lower again this morning, following a selloff on Friday off the weak jobs report and in the wake of the OPEC+ production increases for September that were announced yesterday. The jobs report points to lower US demand ahead. ULSD prices collapsed on Friday in the wake of the jobs report, as a slowdown in economic activity would point to lower diesel demand.
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