Energies Futures Prices
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Futures Market News and Commentary
Aug WTI crude oil (CLQ19) on Friday closed up +0.33 (+0.60%), and Sep Brent crude oil (CBU19) closed up +0.54 (+0.87%). Aug RBOB gasoline (RBN19) closed up +0.0063 (+0.34%). Ramped up tensions in the Middle East fueled gains in the energy complex on Friday. Tensions have escalated this week after the USS Boxer naval vessel on Thursday shot down an Iranian drone near the Strait of Hormuz and after the AP reported Friday that Iran's Revolutionary Guard said it seized a British oil tanker in the Strait of Hurmuz. That followed Thursday's confirmation that Iran on Sunday seized a foreign oil tanker in the Persian Gulf. Another positive for crude is some trade optimism after news that U.S. and Chinese senior officials spoke by phone late Thursday. Crude prices remaned Friday afternoon after weekly data from Baker Hughes showed active U.S. oil rigs fell by -5 to 779 the week ended Jul 19, a 17 month low. Aug WTI crude and Sep Brent crude fell to 1-month lows Thursday and Aug RBOB gasoline fell to a 3-week low on concern about increased supplies and mixed demand. The outlook for increased Russian crude production weighed on crude prices after Russian pipeline operator Transneft PJSC said Thursday it had resumed full flows from Russia's largest crude producer, Rosneft PJSC, which had stopped sending crude through Transneft pipelines on Monday due to technical issues. Also, Wednesday's EIA report showed that gasoline stockpiles unexpectedly rose +3.565 million bbl (vs expectations for a -2.4 million bbl draw) and that distillate supplies rose +5.686 million bbl (vs expectations of +1.0 million bbl). Wednesday's EIA data showed that U.S. crude oil inventories as of July 12 were +5.3% above the 5-year average, gasoline inventories were +2.1% above the 5-year average, and distillate inventories were -1.5% below the 5-year average. Big Picture Crude Oil Market Factors: Bullish factors include (1) the agreement by OPEC+ to extend its production cut agreement by 9 months until March 2020, (2) the -130,000 bpd decline in OPEC June crude production to a 5-year low of 30.00 million bpd, (3) heightened Iran tensions after the recent attacks on oil tankers and the downing of U.S. and Iranian drones near the Strait of Hormuz, (4) the sharp drop in Iranian oil production from U.S. sanctions and in Venezuela oil production from U.S. sanctions and the economic crisis, and (5) the decline in active U.S. oil rigs to a 1-1/2 year low of 784 rigs in the week ended July 12. Bearish factors include (1) global trade tensions that may drag global growth and energy demand lower, (2) the recent surge in U.S. oil production to a record high of 12.4 million bpd, and (3) ample current supplies with U.S. crude oil inventories +5.3% above the 5-year average as of Jul 5, just below the recent 1-3/4 year high of 485.47 million bbl.
Aug Nymex natural gas (NGQ19) on Friday closed down -0.036 (-1.57%) at a 2-week low. Nat-gas prices fell to a 2-week low Friday on the outlook for the current heatwave to end and for cooler temperatures to move across the U.S., which should curb nat-gas demand for air conditioning. The Commodity Weather Group said Friday that temperatures will be above normal across most of the U.S. through July 23 but will fall back to normal during July 24-28, with slightly warmer temperatures on the West Coast and Northeast. Nat-gas prices are also being undercut by robust U.S. nat-gas output as Friday’s data showed that U.S. lower 48-state nat-gas production rose +5.6% y/y to 84.837 bcf. In a supportive development, the EIA reported Thursday that nat-gas supplies rose by only 62 bcf in the week of July 12, below expectations of 71 bcf and below the 5-year average of 63 bcf. Thursday's report broke the 16-week string of reports that were above the 5-year average. Thursday's EIA data showed that U.S. nat-gas supplies stood at a 6-month high of 2.533 bcf as of July 12, up +12.7% y/y but -5.3% below the 5-year average. Big Picture Natural Gas Market Factors: Bullish factors include (1) solid demand from Mexico for U.S. nat-gas, (2) strong global natural gas demand due to firm global economic growth and the need to substitute for coal to reduce global CO2 emissions, and (3) significant U.S. LNG nat-gas export potential as more LNG ports are built in the U.S. and around the world. Bearish factors include (1) the action by China to raise tariffs on U.S. LNG exports to 25% from 10% as of June 1, which effectively eliminated any Chinese buying of U.S. nat-gas, (2) the rise in U.S. nat-gas inventories by more than the 5-year average in each of the last sixteen weeks through July 5, leaving inventories up +12.7% y/y (although -5.3% below the 5-year average), and (3) near-record U.S. natural gas production and forecasts for production growth of +3% in 2019.