Nat Gas Takes Out Eight-Month Low

CRUDE OIL

September Crude found support yesterday and overnight on the prospects of stiff sanctions on buyers of Russian crude oil. On Monday  President Trump shortened deadline for Russia to make progress toward a Ukraine war peace deal to 10 or 12 days, otherwise buyers of Russian crude could be slapped with secondary tariffs of 100%. In his post meeting comments with Chinese officials, Treasury Secretary Bessent said he warned Chinese officials that continued purchases of sanctioned Russian oil would lead to big tariffs but was told that Beijing would protect its energy sovereignty. Sources told Reuters that API US crude oil stocks were +1.54 million barrels last week versus an average expectation from a Reuters poll calling for -1.3 million. API gasoline stocks were -1.74 million barrels versus -600,000 expected, and distillate stocks were +4.19 million versus +300,000 million expected. The market did not react much to this news, with the EIA report due later this morning and the sanctions capturing traders’ attention.

NATURAL GAS

September Natural Gas took out Monday’s eight-month low this morning, as the market remains well supplied despite the prospect of above normal temperatures returning next week. A cooler trend is moving into the Midwest this week, but the 6-10 and 8-14 day forecasts now show mostly above normal temperatures across the lower 48, with some near or below normal west of the Rockies in the 6-10-day. The weather has not been consistently hot enough this summer to slow US storage builds, which have been running ahead of the average for most of the summer. LSEG said average gas output in the Lower 48 has risen to 107.5 billion cubic feet per day so far in July, up from a record of 106.4 bcfd in June. For the storage report this week, the early Reuters poll has a range of expectations for natural gas supply to show build of 21 to 48 bcf for the week ending July 25. The five-year average change for the week is +28 bcf. The IEA has global electricity demand increasing at one of the fastest sustained rates in over a decade in the next few years, which is beneficial to natural gas consumption.

PRODUCTS

Of the three API numbers, the jump in distillate stocks was the most bearish, which puts diesel on the defensive to start.

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