Highlights
- Latest EIA data bullish
- Covid-19 restrains prices
- Mu variant now appearing
- Natural gas prices approach major resistance
The Matrix
The weekly Energy Information Administration supply & demand report for the week ending August 27 did not reflect the devastating impact of Hurricane Ida. Ida made landfall on August 29th as a category 4 hurricane. The next EIA report is set to be released on September 9th.
The most recent EIA report (released on Wednesday, August 25) was generally bullish. Overall demand for petroleum products was 22.8 million barrels daily, an all-time record, boosted by the national effort to normalize economic activity.
Gasoline demand for the week was 9.6 million barrels daily, the same as during the previous week. Propane demand came in at 1.3 million barrels per day, a weekly gain of 230 thousand barrels daily.
The loss of inventory continued. Commercial crude oil stocks lost 7.1 million barrels for the week, following on a series of reductions that now have gasoline inventories below the low end of the five-year average. A bearish note was sounded as domestic production of crude oil added another 100,000 barrels daily.
The re-emergence of Covid-19’s Delta variant has thrown a spanner into bullish expectations. (A new variant, “mu” is now emerging. The World Health Organization says Mu mutations could evade “immunity provided by a previous Covid-19 Infection or vaccination.”
OPEC+’s attitudes influence supply expectations. The group recently stated a continued commitment to its previously announced plan to increase output by 400,000 barrels per day on a monthly basis. These planned increases are intended to help meet expected demand growth. The increase of 400,000 barrels per day is intended to help meet expected demand growth. OPEC+ views the current rally in crude oil prices as a reaction to disrupted Mexican supply and the effects of H. Ida.
The beginning of autumn finds an oil market in deficit. The implications for a bullish reaction are uncertain as Covid-19 continues to wreak havoc in regional markets. A break of resistance at $2.21 basis the front-month contract is necessary for another significant bullish move in ULSD futures prices to develop.