Oil, fundamental analysis
Crude oil market uncertainty continues to reign as the price consolidation period stretches into its fourth week. New sanctions on Russia, Iraqi drone strikes on Kurdish oil fields, the prospect of new tariffs, inflation readings and a stronger US dollar tugged the market in different directions this week.
WTI reached a High of $69.65/bbl on Monday with the weekly Low of $65.40 set on Wednesday despite the reported inventory decline and matching the previous week’s Low. Brent crude had a weekly Low of $67.70/bbl Monday and a High of $71.65 Wednesday. For the past 4 weeks, prices for the US standard have consolidated into a range of $64-69.65.
Meanwhile, the Brent/WTI spread has widened to $3.20. Large increases in refined products were the main bearish signal for the week and could indicate a below-average summer demand occurring. Both grades are lower week-on-week.
Iraq launched a series of drone strikes on key Kurdish oilfields, reducing the output by about 200,000 b/d. Baghdad and the Kurdish government have been in a dispute over the oil production for years and negotiations have not been successful. However, a plan has now been approved for the Kurds to transfer 230,000 b/d to Iraq’s state oil marketer. Meanwhile, Russia’s crude oil production dropped by 3.5% in the January-May period vs. the same timeframe in 2024.
Despite new EU sanctions on Russia including a lower “cap” price, traders realize that Urals will continue to find their way to black markets and foresee no disruption of Russian exports. Even President Trump’s threats of 100% tariffs to be imposed on Russia should they not cease attacks on Ukraine within 50 days are not seen as effecting global oil markets.
It turns out that OPEC+’s output increase for June was actually only 349,000 b/d, lower than the planned 411,000-b/d hike. Maylasia plans to crack down on illegal Iranian “ship-to-ship” crude transfers within its jurisdictional waters after pressure from the US. This could impact the 1.5-1.7 million b/d of Iran’s oil exports bound for China whose refinery activity increased last month to the highest level in almost 2 years.
ExxonMobil is borrowing up to 1.0 million bbl from the US Strategic Petroleum Reserve to replace contaminated crude from the Mars platform in the Gulf of Mexico. Deliveries to the company’s Baton Rouge refinery have been disrupted with product output impacted.
Overall, the market is looking down-the-road and foresees a supply overhang due to the projected output increases coming from the OPEC+ group. However, short-term supply concerns are being reflected in the 'backwardated' market whereby, near-term prices are higher than 'out' months.
The Energy Information Administration’s (EIA) Weekly Petroleum Status Report indicated that commercial crude oil inventories for last week fell while motor gasoline and distillates rose. The SPR was down 300,000 bbl to 402.7 million bbl.
Housing starts in June rose slightly but were still -0.5% lower than last year. Both consumer sentiment and retail sales increased last month but so did inflation. The June CPI rose +2.7% from a year-ago, up from May’s 2.4% and reflects some initial impacts from the Trump tariffs. The Fed’s preferred gauge of inflation, the PPI, was flat in June compared to May at +2.3% on an annual basis. This was lower than the expected 2.5%. The Dow & S&P are both down on the week while the NASDAQ is positive. The USD has made some gains this week which may continue to hold crude prices back.
Oil, technical analysis
August NYMEX WTI Futures prices are trading around the 8- and 13- and 20-day Moving Averages which have essentially converged. Volume is below the recent average at 77,000 as the August contract expires next Tuesday. The Relative Strength Indicator (RSI), a momentum indicator, is in neutral territory at 53. Resistance is now pegged at $68.00 while near-term Support is $67.40 (8-day MA). The convergence of the Moving Averages signals a movement away from them. That direction is unknown at this time but will have good momentum behind it.
Looking ahead
China has threatened to block the sale of a group of Panama Canal ports to US investment firm BlackRock if Chinese shipping giant, COSCO, does not get a stake in the transaction. Hong Kong’s CK Hutchinson is the current owner of the ports. And issues surrounding the Trump tariffs and trade negotiations will continue to lead to ups-and-downs for oil prices.
With about 6 weeks left in the summer driving/traveling season, gas demand thus far as been below normal. The Tropics in the Atlantic basin have become more active with TS Chantel now followed by Invest-93 which is expected to gain strength as it traverses across the Gulf Coast states.
Natural gas, fundamental analysis
August NYMEX Henry Hub futures have stair-stepped higher the past several days mainly on increasing areas of hotter weather and declining storage injections. The week’s High of $3.63/MMbtu occurred on Thursday and Friday, creating a technical “Double-Top” with the week’s Low of $3.38 on Monday.
Supply last week was +0.5 bcfd to 113.1 bcfd vs. 112.6 the prior week. Demand was +2.3 bcfd to 107 bcfd vs. 104.7 bcfd the week prior, with the biggest increase in power generation.
Exports to Mexico were 6.5 bcfd vs. 6.6 the prior week. LNG exports were 16.5 bcfd vs. 16.0 bcfd the prior week with new production coming online. Venture Global LNG has been slowly increasing its production from the Plaquemines Phase 2 project.
European natural gas prices were most recently lower at $9.90/MMbtu equivalent despite strong demand in Asia which is causing some cargoes to be diverted there. The JKM marker price for LNG imports in Asia is about $12.00/MMbtu presently.
The EIA’s Weekly Natural Gas Storage Report indicated an injection of 46 bcf, below the forecasted 47 bcf increase and above the 5-year average of +41 bcf. Total gas in storage is now 3.052 tcf, dipping to -4.9% below last year and rising to 6.2% above the 5-year average.
Natural gas, technical analysis
August 2025 NYMEX Henry Hub Natural Gas futures have risen above the 8-, 13- and 20-day Moving Averages. Volume was 114,000 and lower than the recent average. The RSI is neutral at 51. Support is pegged at $3.50 (Friday’s Low) with Resistance at $3.63 (the double-top). If the double-top can be breached, look for a rally higher. If not, traders will push for new recent Lows.
Looking ahead
The near-term forecast does not indicate large areas of hot temperatures; however, the last week of July looks to have above-normal temperatures for a large portion of the country. LNG production continues to increase providing new demand. Natural gas markets also have to monitor the Tropics not only for offshore supply disruptions but also for the instantaneous drop in demand that torrential rainfalls bring.
About the Author
Tom Seng
Dr. Tom Seng is an Assistant Professor of Professional Practice in Energy at the Ralph Lowe Energy Institute, Neeley School of Business, Texas Christian University, in Fort Worth, Tex.