Written Commentary
CRUDE OIL
Energy demand expectations are improving along with rising stock prices, reduced Covid restrictions in China, promises of Chinese stimulus and given further atrocities committed by the Russians. Furthermore, OPEC+ reduced its 2022 global oil market surplus from 1.4 million barrels per day to only 1 million barrels per day and BP indicated that world oil demand in 2021 reached pre-covid levels. Along those lines, it should be noted that OPEC+ in May posted a 2.7 million barrel per day production shortfall relative to the most recent output tally. Fortunately for the bear camp, the crude oil market is likely to fret over OPEC+ plans to increase output in August by 648,000 barrels per day and the media this morning captured personal dialogue between the French and US leaders at the G7 meeting regarding the amount of production expansion possible from Saudi Arabia. However, the trade realizes Saudi Arabia will likely expand production gradually and therefore world supply and demand could remain in deficit if global economic sentiment remains upbeat.
We attribute most of the strength in gasoline this week as a rally fomented by improved energy demand expectations in the wake of across-the-board gains in global equities and favorable US scheduled data. In other minimally supportive news, the UK and Brazil are considering reducing taxes on fuel and/or providing subsidies to assist consumers, Sri Lanka has implemented fuel rationing and US gasoline imports from Europe declined to 12-week lows in the week ending June 23rd. With record Asian refinery margins and evidence of increased fuel transportation bookings to the US, gasoline supplies are likely to rise next month but the trade is uninterested in that storyline today. Fortunately for the bull camp, near term peak seasonal demand will likely result in the next two EIA weekly reports favoring the bull camp.
NATURAL GAS
In addition to a double low on the charts around $6.06, the natural gas market has carved out recent declines on diminishing trading volume. However, US weather forecasts remain neutral to bearish, and reports of rising strategic supplies throughout Europe removes shortage fears and tempers prompt prices. Granted, US cooling demand is expected to come in higher than normal, but without a widespread national wave of extreme heat, LNG supply at US ports should continue to build. Along those lines, LNG daily storage at US export terminals jumped by 13% on a day over day basis in a possible reaction to an ongoing terminal outage caused by fire.
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