Energies Upbeat on Demand

CRUDE OIL

July Crude Oil is higher this morning but is has yet to take out yesterday’s highs, which came on the news that US and China had agreed to postpone the tariffs for 90 days. If it turns out that a “trade war” has been averted, this should support energy demand going forward. In the meantime, OPEC+ plans to boost production significantly in May and June, to the tune of 411,000 barrels per day each month. The increase has been attributed to Saudi Arabia and other members being frustrated with overproduction by Kazakhstan and Iraq, but it is also possible they see demand improving. Reuters expects Saudi Arabia to ship about 48 million barrels to China in June, the same as May. For the inventory reports this week, the early Reuters poll has an average expectation for US crude oil stocks to be -2 million barrels last week, with gasoline -700,000 barrels and distillates up 400,000.

NATURAL GAS

July Natural Gas has failed to move above the 50-day moving average in two attempts in two sessions, and that area (4.112-4.125), could be a bull/bear range today. The trade agreement between the US and China was supportive to crude but not necessarily natural gas because higher crude prices would support US crude production and therefore support gas production in joint wells. The European Union’s Energy Commissioner said today that the bloc does not intend to revive its imports of Russian energy, even if there is a peace agreement between Ukraine and Russia. This follows reports that the topic was being discussed in talks between the US and Russia over terms of an agreement. Recently there have been reports that some EU countries would like to see Russian gas flows to Europe again, while others have flatly rejected that idea. For the EIA report this week, the early Reuters poll has expectations for US natural gas storage to show a net injection of 104-114 bcf last week. After a warm trend this week, conditions are expected to turn cooler across the northern half of the lower 48 states, with the 6-10 day forecast showing below normal temperatures from the PNW, across the Rockies and northern Plains and extending across the Midwest to the East Coast. This could bring some late-season heating demand.

PRODUCT MARKETS

For the inventory reports this week, the early Reuters poll has an average expectation for US gasoline stocks to be -700,000 barrels last week and distillates up 400,000.

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