Tariff Concerns Will Continue to Weigh on Demand

CRUDE OIL

September Crude Oil is slightly lower this morning. Traders are apparently doubting the potential effectiveness for the latest round of sanctions issued by the European union against Russian oil exports, as Russian has been able to circumvent previous attempts to block sales. However, other analysts think that the EU import ban on refined oil products processed from Russian oil in third countries could have some impact. Last week’s drone attacks on Kurdistan oilfield have slipped from the headlines. The Baker Hughes rig count showed US oil rigs in operation were down 2 last week to 422. This was down from 477 rigs a year ago and below the five-year average of 435. Iran announced today that nuclear talks with Britain, France and Germany are scheduled for this coming Friday in Istanbul. The three nations had threatened to restore UN sanctions by the end of August if nuclear talks that were ongoing between Iran and the US before the Israel-Iran air war do not resume or fail to produce concrete results. Tariff concerns will continue to weigh on demand expectations, but US crude and especially distillates supplies remain very low.

NATURAL GAS

technical development this week and indications that producers are looking to boost output. The Baker Hughes rig count showed US natural gas rigs in operation up 9 to 117 last week. This was up from 103 rigs a year ago and above the five-year average of 113, and it was the biggest gas rig count since March 1, 2024. The NWS 6-10 and 8-14 forecasts for still call for above normal temperatures over most of the lower 48 states, with the exception of below normal expected in California, Nevada, Oregon, and Washington in the 6-10 day. This looks like the it will be the longest, hottest period so far this summer and should support cooling demand. However, US gas supplies remain elevated, and weekly injections have been above average in 16 out of the last 18 weeks. LSEG said on Friday that average gas output in the Lower 48 rose to 107.1 billion cubic feet per day so far in July, up from a monthly record high of 106.4 bcfd in June. They also forecast average gas demand in the Lower 48, including exports, to fall from 110.1 bcfd last week to 107.4 bcfd this week before rising to 110.9 bcfd in two weeks.

PRODUCTS

September ULSD rallied to its highest level since June 24 on Friday but closed well off its highs, leaving a spike high. US distillate supplies are the lowest in a least six years, which makes the diesel market an upside leader for the complex.

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