Possibility of More Mideast Supply Uncertainty

CRUDE OIL

Higher OPEC+ production is on traders’ minds, but so is tight US crude oil supply and the possibility of more Mideast supply uncertainty as Houthis step up their attacks on shipping. Overnight, two crew members of a Liberian-flagged, Greek-operated bulk carrier were killed in an attack off Yemen. This was the second attack in two days, and these were the first deaths involving shipping in the Red Sea since June 2024. On the demand front, the tariff situation remains fluid with the implementation date pushed to August and the possibility of trade agreements being reached ahead of that deadline. There seems to be a growing expectation that OPEC+ will lift its quota another 550,000 bpd in September. For the US storage report this week, the early Reuters poll has an average trade expectation for US crude oil stocks show a decline of 2.6 million barrels last week, with distillates expected to be -0.2 million and gasoline -1.7 million. Refinery runs are expected to be +0.2% to 95.1%. US crude and distillate stocks are at or near six-year lows for this point in the season.

NATURAL GAS

September Natural Gas has not been able to capitalize on yesterday’s bounce off seven-month lows. US production has apparently started off strong this month, with LSEG reporting average gas output in the lower 48 states rose at 107.0 billion cubic feet per day so far, up from a monthly record of 106.4 bcfd in June. The weather forecast continues to point to above normal temperatures, but occasional normal and below normal temps have emerged from time to time to keep a lid on cooling demand. That being said, LSEG forecast average gas demand in the Lower 48, including exports, to rise from 105.9 bcfd this week to 107.5 bcfd next week. For the EIA gas storage report this week, the early Reuters poll has a range of expectations calling for US storage to show a net build of 48 to 61 bcf last week. The five-year average change for the week is +49 bcf (range +16 to +65). According to LSEG, the average amount of gas flowing to the eight big US LNG export plants rose to 15.5 bcfd so far this month, up from 14.3 billion in June and 15.0 billion in May.

PRODUCTS

Gasoline prices are leading the way higher this morning, as they continue to reclaim some of their losses relative to diesel prices. While US crude and distillate stocks are at or near six year lows for this time of year, gasoline stocks are not, which may have had something to do with gasoline prices laggings the other members of the complex. However, we are in the peak driving season.

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