After four weeks of gains, oil prices settled lower last week with ICE Brent down more than 1.7% over the week. While fundamentals are still supportive, there are growing demand concerns, largely emanating from China. This is reflected in the move lower in apparent domestic oil demand, while June crude oil imports fell YoY once again. Given that China is expected to make up the majority of oil demand growth this year, it is not surprising signs of weakness in Chinese demand are a concern. USD strength following the attempted assassination of former president Trump over the weekend is putting pressure on oil prices in early morning trading today.
Positioning data showed small changes over the last reporting week. Speculators increased their net long in ICE Brent by 4,438 lots to 200,249 lots, which still leaves the net long some distance from the recent high of almost 335k lots in mid-April. The market needs a fresh catalyst to bring in a new round of sizeable speculative buying, particularly with demand concerns hanging over the market.
Sticking with market positioning, ICE gasoil saw a fair amount of speculative longs liquidating. The managed money net long fell by 12,449 lots to 82,798 lots over the last week. Given the bearish fundamentals for middle distillates, we still believe that speculators are overextended and could see further selling in the weeks ahead.
US natural gas prices remain largely under pressure, front-month Henry Hub futures are trading below US$2.30/MMBtu, after hitting US$3.20/MMBtu back in mid-June. Speculators have also returned to holding a net short in Henry Hub, after selling 37,483 lots over the last reporting week, leaving them with a net short of 34,317 lots. More recent weakness in Henry Hub appears to be due to an outage at Freeport LNG, following Hurricane Beryl. The LNG export plant is taking longer than expected to resume operations. The outage will also be providing support to European gas prices with TTF strengthening by 3% in the last two trading sessions of last week.