Trading Economics:
WTI crude oil futures rose above to $63.60 per barrel on Thursday (at $63.38 at the time of this post), after a 0.9% loss in the previous session, supported by expectations of stronger summer demand. < This happens EVERY YEAR starting with the Memorial Day weekend.
> As the peak travel season approaches, markets anticipate increased fuel consumption, helping lift prices despite ongoing concerns about oversupply. > In the US, crude inventories fell by 4.3 million barrels last week, the largest draw since November, reinforcing the view that demand is picking up. < Again, Refineries (the "Consumers" of crude oil) ALWAYS RAMP UP to near 95% capacity in June.
> On the supply side, Saudi Arabia is pushing for another significant OPEC+ production increase of at least 411,000 barrels per day in August, and possibly in September.
> Meanwhile, Saudi Arabia cut July crude prices for Asia to near four-year lows, signaling softer demand from that region. < They clearly want to stay on the good side of Trump, and they also see that demand for oil-based products is ramping up.
> Why no mention about Russia or Iran?
US natural gas futures fell over 2% to $3.62/MMBtu after a larger-than-expected increase in storage levels. < Back to $3.70 at the time of this post.
> The EIA reported a 122 billion cubic feet (bcf) storage build for the week ending May 30, surpassing forecasts of 111 bcf. This marks the seventh straight week of above-normal injections, pushing total inventories to 2.598 trillion cubic feet, 4.7% above the five-year average.
> Also, gas flows to the major LNG export terminals dipped to 13.8 bcfd so far in June, from 15.0 bcfd in May, mainly due to seasonal maintenance at plants like Cheniere’s.
> Meanwhile, warmer-than-usual weather is forecast through mid-June. On the supply side, average gas production in the Lower 48 states fell slightly to 104.0 bcfd so far in June, from 105.2 bcfd in May and March’s record of 106.3 bcfd. < I'm seeing forecasts that "Associated Gas" production is and will continue to decline.
Keep in mind that natural gas does not go to storage my itself. I believe that utilities are purposely directing more gas to storage in an effort to lower the chance of a Bidding War for supply like we had in August 2022 when the front month NYMEX contract SEP22 spiked to $9.30. Maybe LNG exports are doing the same.
JAN26 futures contract now at $5.05/MMBtu.
Dan Steffens
Energy Prospectus Group |
