EU Trade Agreement Boosts Demand Expectations

CRUDE OIL

September Crude Oil is higher this morning in the wake of the framework of trade agreement between the US and the EU that eases economic anxiety to some degree. The agreement set an import tariff of 15% on most EU goods, down from the threatened 30%. President Trump said the deal calls for $750 billion of EU purchases of US energy in the coming years, but details are scant and is some cases conflicting, with some reports that there was $750 million allocated for LNG and others for a mix of products. Others expressed skepticism that those  goals are even realistic. Treasury Secretary Bessent and the Chinese Vice Premier are meeting in Stockholm today and there are hopes that they will extend the August 12 deadline to avoid a steep increase in tariffs. The Baker Hughes rig count showed US oil rigs in operation were unchanged at 415 rigs last week. This was down from 482 rigs a year ago and below the five-year average of 436 and the lowest since September 17, 2021. An OPEC+ panel will meet online today to review compliance with output agreements ahead of Sunday’s gathering to decide on increasing oil output for September. Expectations are for another 548,000 barrels per day increase in September, which would follow a similar increase in August.

NATURAL GAS

September Natural Gas is higher this morning, perhaps on increased US LNG export expectations now that the US has agreed to a framework of a trade agreement. President Trump said the agreement included a pledge by the European Union to purchase $750 billion worth of US energy products over the next three years, and traders suspect that a substantial portion of that would consist of LNG. On the bearish side, the Baker Hughes rig count showed US natural gas rigs in operation were up 5 rigs to 122 last week. This was up from 101 rigs a year ago, above the five-year average of 111, and the highest they have been since April 2023. The number of rigs has increased by 14 in just two weeks.  Near-record heat over the weekend and early this week supports electricity demand in the near term, but the 6-10 and 8-14 day forecast is mixed. The 6-10-day has normal or below normal temperature across most of the nations, with above normal dominating in the 8-14 day. The lack of an extended hot pattern has allowed US storage to build at a faster than normal pace this summer. Last week’s report showed an below average build for only the second time in 14 weeks. Qatar has threatened to cut gas supplies to the European Union in response to the bloc’s due diligence law on forced labor and environmental damage. Qatar is the world’s third-largest exporter of LNG, after the US and Australia.

PRODUCTS

September RBOB broke out of last week’s sideways pattern to its highest level since July 18, Friday’s Commitments of Traders Report

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