Over the past several days, crude prices have recovered from multi-month lows amid continued tensions in the Middle East, with Iran expected to attack Israel
Time spreads have been signaling increased strength, with Brent prompt spreads widening
Furthermore, WTI prompt spread (September-October) is at its strongest backwardation since October 2023, indicating physical strength in the near-term
Additionally, July's producer-price index indicated a slight slowdown in factory-gate inflation from June, reinforcing speculation of a Fed interest rate cut in September
IEA data shows oil market could flip to surplus (BBG)
If OPEC follows through with its plan to increase production next quarter, markets could flip from a deficit to a surplus, according to data from the IEA
Meanwhile, demand has been weak, with Chinese consumption falling for a third consecutive month in June
OPEC, led by Saudi Arabia, is planning to bring 543 MBbl/d back during the fourth quarter of 2024 but has said this plan could be paused or reversed depending on market conditions
Traders and analysts have been divided on whether OPEC will follow through with its plan, based on surveys by Bloomberg
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Gas trades modestly higher, balancing bullish supply/demand signals from the August rally against potential hurricane risks and high storage levels
Coming off five straight days of gains, prompt gas was 1.5c higher to $2.204/MMBtu (As of 7:56 AM)
Winter ‘24/’25 strip is up 1c to $3.250 and the Summer ’25 strip is up 1.2c to $3.202
NWS data indicated Tropical Storm Ernesto could strengthen into a hurricane as it moved north of Puerto Rico, though it was not projected to hit the U.S. mainland (NGI)
August's LNG demand recovery, driven by steady demand in Asia and Europe, is supportive, with Europe's limited gas storage capacity relative to winter demand adding upward pressure on US gas prices
Today’s European Ensemble shows limited changes in weather forecast as Lower 48 temps remain near the 10-year average, with a rangebound pattern expected through late August (Criterion)
Texas ERCOT coal power falls in July (Argus)
Coal-fired power generation in ERCOT dropped to 6 mn MWh in July, down from 6.8 mn MWh a year earlier, marking the sixth consecutive month of decline
Overall power generation in ERCOT decreased by 5.5% to 44.6 mn MWh due to power outages caused by Hurricane Beryl, which left over 2 mn people without power
Solar power generation increased by 30% to 5.2 mn MWh, making up 12% of ERCOT's fuel mix, reflecting a significant buildout of solar capacity in Texas
Gas-fired generation fell by 8% despite lower natural gas prices, dropping to 21.9 mn MWh and comprising 49% of ERCOT's fuel mix, down from 50% a year earlier
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