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Daily First Look
Daily briefThomas Liardon

Oil Extends Losses as Tankers Transit the Strait; Gas Steady on Minimal Forecast Shift

Crude trades lower, extending losses

  • The August WTI contract is trading near $68/Bbl, as the market continues to watch for signs of normalization in crude flows in the Middle East
  • According to Bloomberg, about 15-20 tankers have been transiting the Strait of Hormuz per day, over the past two weeks
    • Pre-conflict levels are about 60-80 tankers per day
  • RBC said in a note that they view Hormuz transits remaining below pre-war levels for some time, given continued security threats and Iran’s insistence on retaining control of the strait

Saudi Arabia cuts official selling price by most in 26 years (Bloomberg)

  • Saudi Aramco cut the price of its primary oil grade sold to Asia customers by $11/Bbl, bringing the official selling price to a -$1.50/Bbl discount to Brent
  • This is the biggest cut in at least 26 years, as the reopening of the Strait of Hormuz threatens to flood global markets with supply
  • The price cut indicates that they view the physical market weakening and competition among buyers decreasing, in the near-term
  • OPEC+ agreed to another output quota increase for August, signaling that they won’t hold back producers

Gas holds steady with a minimal weekend forecast shift

  • Natural gas is up 0.2c to $3.198/MMBtu (As of 07:49 AM CDT)
  • There was minimal change to the L48 weather forecast over the weekend
    • The West region warmed 11.9°F, which was mostly offset by smaller losses throughout the L48 (Criterion)
  • CDDs peaked in the range on Friday around 17 before tapering off to around 11 today (Criterion)
    • CDDs are expected to steadily rise over the next two weeks as the average temperatures move up

Upstate New York gas prices spiked (S&P)

  • Spot natural gas prices in upstate New York spiked July 1
  • Iroquois Zone 2 spot price reached $11.48/mmbtu for July 2 flows, highest since mid-February
  • Power demand moved up as temperatures jumped to around 9% warmer than seasonal norms
    • Net flows from Eastern Canada to the Northeast rose 582 MMcf/d on July 1

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