Ukraine War Jitters on Traders’ Minds

CRUDE OIL

The wars in the Middle East and Ukraine are keeping concerns about crude oil supply interruptions on traders’ minds. Russia launched an airstrike (missiles and drones) at Ukraine early today, causing significant damage to a thermal power plant and putting pressure on their electrical grid. This followed a drone strike on Russian oil loading facility in the Black Sea recently earlier this week. The Israeli Foreign Minister threatened “all-out war” with Hezbollah yesterday. Sources told Reuters that API crude stocks rose by 2.264 million barrels for the week ending June 14 versus expectations for a 2.3 million barrel draw. This leaves focus on the EIA report is this morning. The trade is looking for some indication that the summer driving demand season has begun, as implied gasoline demand readings have been disappointing in recent weeks

PRODUCT MARKETS

API gasoline stocks were reportedly down 1.077 million barrels versus expectations for an increase of 1.5 million. If this is confirmed by the EIA data, it could pull gasoline out of its doldrums. Traders will also be watching for an improvement in implied demand, which came in at 9.04 million barrels per day in last week’s report versus 9.193 million a year ago. Distillate stocks are expected to be down 300,000 barrels versus a gain of 900,000 the previous week. Last week’s report showed US stocks at 123.4 million barrels versus 113.9 million the previous week and a five-year average of 133.0 million

NATURAL GAS

Natural gas prices eased overnight despite the heat wave hitting the East Coast garnering a lot of media attention. Tropical Storm Alberto landed in Mexico and posed little threat to US LNG loading facilities in the Gulf, but maintenance at two facilities on the Gulf Coast and one on the East Coast could reduce export capability over the near term. Dutch and European gas prices were higher overnight on concerns about remaining Russian gas flows to Europe. Increasing wind speeds are reducing gas-for-power demand, but supplies from LNG terminals are reported to be limited. Austria’s OMV has warned  that Russian gas producer Gazprom may halt piped shipments amid legal action from third parties that may suspend payments. European gas facilities were last seen 74% full, historically high for this time of year but down from year ago levels. The weekly US EIA storage report tomorrow is expected to show a net injection of 66-80 bcf for the week ending June 14 versus +74 bcf the previous week and +92 bcf a year ago. In last week ’s report, total storage was 2,974 bcf versus 2,520 a year ago and a five-year average of 2,312. The extended forecasts call for much above normal temperatures across a wide swath of the US, from the Rockies to the Eastern Seaboard out through July 3. Above normal temperatures are expected across most of the lower 48, except for the northwest and the extreme northern plains.

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