Crude Sinks on Energy Demand Concerns and Possible Iran Nuclear Deal

Sep WTI crude oil (CLU22) this morning is down -3.79 (-4.12%), and Sep RBOB gasoline (RBU22) is down -9.74 (-3.20%).  Sep Nymex natural gas (NGU22) is down -1.43%

Oil prices this morning are sharply lower and posted a 6-1/2 month nearest-futures low.    A stronger dollar today is weighing on crude prices along with weaker than expected Chinese and U.S. economic data, which raises global energy demand concerns.  In addition, crude prices extended their losses today amid a potential breakthrough in nuclear negotiations with Iran, which could restore Iran's crude exports to global markets.

Nat-gas prices this morning are moderately lower.  Forecasts for cooler U.S. temperatures that will reduce nat-gas demand from electricity suppliers to supply energy for air-conditioning are bearish for prices.  Nat-gas prices are also under pressure today amid a broad selloff in commodity prices on concern a slowdown in the global economy will curb demand for commodities, including nat-gas.

Today's weaker-than-expected global economic data is bearish for energy demand and crude prices.   The U.S. Aug Empire manufacturing survey general business conditions plunged -42.2 to -31.3, weaker than expectations of 5.0 and the steepest pace of contraction in 2-1/4 years.  Also, the U.S. Aug NAHB housing market index fell -6 to a 2-1/4 year low of 49, weaker than expectations of 54.  In addition,  China July industrial production rose +3.8% y/y, weaker than expectations of +4.3% y/y, and China July retail sales rose +2.7% y/y, weaker than expectations of +4.9% y/y.  Finally, Japan Q2 GDP rose +2.2% (q/q annualized), weaker than expectations of +2.6%. 
 
In a negative factor for crude prices, Iran said it would inform the EU of its official position on a draft text to revive the 2015 nuclear accord by Monday night, signaling it may be nearer to an agreement with the U.S. over a deal that could restore its oil exports to global markets.  

In a bearish factor, Vortexa reported today that the amount of crude stored on tankers that have been stationary for at least a week jumped +20% w/w to 113.35 million bbls in the week ended August 12, the highest in 10 months.

Crude oil prices have support after OPEC+ at its meeting on August 3, said it would boost its crude production target for September by only 100,000 bpd, well below the 600,000 bpd it announced for July and August.  The markets were on guard for a possible larger increase in response to political pressure from the Biden administration.  The added production will most likely be met by Saudi Arabia and the United Arab Emirates, the only members among the 23-nation alliance that have any significant amount of excess production capacity.

OPEC+ production in July rose by +260,000 bpd to 29.050 million bpd, according to the IEA, but is still running more than 2 million bpd below quotas due to various supply disruptions and capacity constraints.  Nigerian and Libyan crude output has fallen in recent months due to damaged pipelines in Nigeria and political unrest in Libya, undercutting the overall OPEC+ production level.  Crude oil exports from Libya, home to Africa's largest oil reserves, dropped to a 20-month low of 610,000 bpd in June.  However, Libyan Oil Minister Mohammed Oun recently said that Libya's crude production should rise to 1.2 million bpd in early August as oil facilities are brought back on line.

Last Wednesday's EIA report showed that (1) U.S. crude oil inventories as of August 5 were -5.2% below the seasonal 5-year average, (2) gasoline inventories were -6.4% below the 5-year average, and (3) distillate inventories were -23.6% below the 5-year average.  U.S. crude oil production in the week ended August 5 rose 100,000 bpd to a 2-1/4 year high of 12.2 million bpd, which is only -0.9 million bpd (-6.9%) below the Feb-2020 record-high of 13.1 million bpd.

Baker Hughes reported last Friday that active U.S. oil rigs in the week ended August 12 rose by +3 rigs to 601 rigs, which was just 4 rigs below the July 29 2-1/4 year high of 605 rigs.  U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.

• Crude Oil Falls on Positive Iran Statement on Nuclear Proposal
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