CRUDE OIL
While the crude oil market is justified in a higher early trade today because of another draw in weekly API crude oil stocks, we leave ultimate control with the bear camp. The fear of demand destruction is clearly present from the developing pattern of soft US and global data, but also because of ideas that China will probably import less oil next month because of their crackdown on refiners and because July Chinese crude oil imports fell by 19% versus year ago levels.
Since the significant July high, the September gasoline contract has led the complex on the downside, and we think RBOB will lead the complex even lower in the days ahead.
NATURAL GAS
With the October natural gas contract breaking out to the downside yesterday, the market could be headed below the $3.75 level in the days ahead. Tropical Storm Grace is expected to strengthen slightly but the projected track is not at the heart of the Gulf of Mexico offshore production area and the storm isn’t expected to reach hurricane status.
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