Crude Slightly Higher After A Reversal Lower

CRUDE OIL

July Crude Oil is slightly higher this morning after a reversal lower yesterday from its highest level since April 4. Reuters reported yesterday that several OPEC+ members will suggest the group accelerate its oil output hikes in June for a second consecutive month, as a dispute worsens over compliance with production quotas. At the center of the dispute are Kazakhstan and Iraq, which have consistent produced above their quotas and have reportedly angered Saudi Arabia and other producers. For its part, Kazakhstan says it is unable to curtail the output of independent oil majors on its territory and that it will not shut down its own oilfields on concerns it would damage their future production. Iraq has said it will curb output, but according to Kplr its exports have increased this month. Adding to the gloomy outlook for prices were comments from Rystad Energy analysts that a prolonged U.S.-China trade war could cut China’s oil demand growth in half this year to 90,000 barrels per day from 180,000 bpd. A third round of US/Iran talks will be held this weekend over Iran’s nuclear production. An agreement, though viewed skeptically, would conceivably end US sanctions on Iranian crude oil sales, adding additional supply to the US market. Yesterday’s EIA report was on the bearish end of expectations for crude oil, as it showed a slight increase in US crude stocks last week versus expectations for a slight decline. Net crude imports jumped back after falling to low levels last week. Imports fell slightly, but exports fell more.

NATURAL GAS

June Natural Gas was slightly lower overnight but it also took out Tuesday’s low to trade to its lowest level since December 19. A mild weather forecast for the US has the trade expecting US gas supply to show large injections over the next several weeks, which could sharply reduce the current deficit to year ago levels. For today’s EIA storage report, the average trade expectation from a poll conducted by Reuters calls for a net injection of 64 bcf last week (range +53 to +80). The five year average change for the week is +62 bcf. As of last week’s report, storage was -20.9% from a year ago and -4.4% below the five-year. One supportive factor is the persistent increased in offtake for LNG exports as US plant capabilities have expanded. LSEG estimates that the average amount of gas flowing to the eight big export plants has climbed from a monthly record of 15.8 bcfd in March to 16.1 bcfd so far this month. However, they also said that average gas output in the Lower 48 rose to 106.5 billion cubic feet per day this month from a monthly record of 106.2 bcfd in March. The 6-10-day forecast shows above and much above normal temperatures across the lower 48 with the exception of some near-normal in the Southwest.

PRODUCT MARKETS

Gasoline and distillate stocks both showed bigger declines than expected in yesterday’s EIA report,  and implied gasoline demand was also strong. Gasoline stocks are below five-year average and are approaching last year’s levels.

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