Market Calmed This Week by OPEC+ Agreement

CRUDE OIL

July Crude Oil was near unchanged overnight inside the range of the previous three sessions. Talks between Chinese President Xi and US President Trump this week produced a glimmer of hope for some sort of agreement, with both parties extending invitations to the other to visit their country, and that at least eases some of the negative concerns about the oil demand. Trade talks are ongoing with Canada as well, which can support ideas that some sort of agreement on tariffs will be reached. The market was calmed this week by the OPEC+ agreement that produced “only” a 411,000 barrel per day increase in production for July, which was lower than what some had feared given reports that Saudi Arabia was lobbying for a bigger increase. The Ukraine/Russia war heated up this week, which lowered the chances of a peace deal that could lead to a drop in sanctions against Russia, and the Iran/US nuclear talks have stalled as well, which pushes back the possibility of sanctions being lifted against them as well. US crude oil stocks fell sharply last week as refineries stepped up activity, but this also brought increases in gasoline and distillate stocks. Implied gasoline demand dropped off after a strong number the previous week for Memorial Day. The US jobs report this morning came in better than expectations, which pushed back fears of a tariff-led recession.

NATURAL GAS

July Natural Gas is inside the range of the past four sessions. The market was pressured by the EIA report yesterday that showed another a large increase in US storage last week, but this wasn’t really a surprise as it followed the recent pattern above normal injections that also beat expectations. Seasonal cooling demand has gotten off to a slow start, but that could change in a week or so, as the 8-14 day forecast shows increased chances of above normal temperatures across most of the lower 48 states. The EIA report showed US natural gas in storage for the week ending May 30 was +122 bcf from the previous week versus an average trade expectation of +111 and above the five-year average change for this week of +100. Storage was down -10.4% from a year ago and 4.1% above the five-year average versus -11.7% and +3.4% the previous week.

PRODUCTS

A large drop in implied gasoline demand and a large increase US gasoline stocks this week undermines support.

 Interested in more futures markets?  Explore our Market Dashboards here.