Oil & Gas Prices - July 2

[dan_s]

If Wednesday's EIA Petroleum Report shows the large draw from crude oil inventories that HFI Research is forecasting (9.16 million barrels), we may see WTI move over $85 tomorrow afternoon. The crude oil inventory build that EIA reported last week was caused by tropical storm activity up the Texas Gulf Coast that kept tankers away from Corpus Christi. Hurricane Beryl is now a Cat 5, but it is expected to weaken before it gets close to Texas on Sunday. It could impact tanker activity next week if it drifts north. This is just the beginning of a very active hurricane season. La Nina in the Central Pacific has opened up the Gulf of Mexico.

Trading Economics:
Oil
WTI crude futures rose above $84 per barrel on Tuesday, the highest since April, due to escalating Middle East tensions and the early start of the Atlantic hurricane season.
> Israel reported 18 soldiers injured in a drone attack by Iran-backed Hezbollah, increasing fears of a broader conflict.
> Meanwhile, Hurricane Beryl, now a category 5 storm, became the strongest storm to form in the Atlantic this early, making landfall on Carriacou Island and heading toward Jamaica.
> Oil prices are also supported by OPEC+ supply constraints and increased travel, with traders watching gasoline demand ahead of the US Independence Day holiday.

Natural Gas
US natural gas futures fell to a six-week low to $2.45/MMBtu, influenced by increased production, lower demand forecasts, and a surplus of gas in storage.
> Despite an ongoing heat wave, gas prices declined as analysts highlighted high inventories and rising production.
> Gas output in the Lower 48 U.S. states averaged 98.8 bcfd in June, up from May's 25-month low of 98.8 bcfd.
> Gas flows to major US LNG export plants dropped in June due to maintenance at several facilities. Feedgas to the Freeport LNG plant increased after a significant drop, with operations impacted by compressor system issues.
> Texas's ERCOT noted that peak demand in June nearly set a record, and July demand is expected to break records due to heightened air conditioning use.
> Hurricane Beryl is expected to affect Mexico's Yucatan Peninsula and the Bay of Campeche, impacting oil production offshore Mexico.

As I posted yesterday, there have been 9 weekly storage builds in a row lower than the 5-year average. That trend is expected to continue. I do not expect U.S. natural gas storage facilities to fill before draws start in mid-November. Plus, with more LNG export facilities coming online soon and demand for gas going up year-after-year, higher ngas inventories heading into winter are required. The U.S. natural gas delivery network is one of our MOST IMPORTANT supply chains.