Oil prices are trying to bounce back as traders try to see whether the summer Monday price collapse was justified, states Phil Flynn of PRICE Futures Group.

Talk about Goldman sacks reducing their price target as well as talk that US crude supply could see a big increase helped feed the Monday sell frenzy along with reports from the Energy Information Administration (EIA) in their Drilling Productivity Report that US shale producers will produce a record 9.375 million barrel of oil a day oil in July despite the fact that the rig counts have fallen.

Whether that is new oil or The EIA fixing their model is open for debate. And as OIL Price says that while output could reach an all-time high, it would be only 8,000 bpd higher than the estimated June crude oil production of 9.367 million bpd.

There are also rumors continuing that the US is going to lift Sanctions on Iran which was once again denied by the White House. Yet the bottom line is that sanctions on Iran have not been working anyway. The same can be said for sanctions and price caps on Russian oil that seems to be flowing with abandon much to the dismay of Saudi Arabia.

Traders are also testing the Saudi Resolve to follow through with the lollipop production cut. The recent drop in oil to a year low and the corresponding drop in Saudi Revenue is making some doubt the Saudis can afford to cut unless they get Russia to cut back production quickly. That might be difficult.

Reports from Reuters and Al Jazeera say Pakistan is celebrating its imports of Russian crude oil and view it to stimulate its economy. Warrior says that Pakistan paid for the oil in Chinese currency and got the oil had a huge discount. Prime Minister Shehbaz Sharif called the arrival of the Russian crude a “transformative day” for the crisis-ridden country. “I have fulfilled another of my promises to the nation,” he tweeted. “This is the first-ever Russian oil cargo to Pakistan and the beginning of a new relationship between Pakistan and [the] Russian Federation.”

The failure of Russian sanctions is irritating the EU. OIL Price reported that “The European Union could move to ban imports of Russia’s pipeline gas by the end of this year if it puts preliminary measures in place, Walter Boltz, energy advisor to the Austrian government, has told Independent Commodity Intelligence Services (ICIS). The EU has seen increased recognition that it could cope without the remaining Russian pipeline gas it gets, but some countries still receiving natural gas via pipeline, most notably Hungary, could seek exemptions or not agree to an EU ban, according to Boltz.”

PEC in its monthly report showed signs of good compliance with cuts. Saudi Arabia led the cuts with 519,000-barrel day production cut lowering their production to 9.9 8 million barrels a day. Even the United Arab Emirates that were looking for a higher quota reduced its production by 140,000 barrels a day in May to 2.89 million barrels per day.

Algeria cut their production by 36,000 barrels a day to 974,000 barrels a day. OPEC also left their Non-OPEC supply growth forecast unchanged at 1.4 million barrels a day.

The other oil concern has been China and its economy.  The market continues to worry that Chinese oil demand will soon disappoint. But President Xi-Jinping is going to try to not let that happen.

Bloomberg reported that “China is considering a broad package of stimulus measures as pressure builds on Xi Jinping’s government to boost the world’s second-largest economy, according to people familiar with the matter.” They also reported that “The People’s Bank of China lowered the seven-day reverse repurchase rate by ten basis points to 1.9% on Tuesday, the first reduction in the rate since August 2022. That increases the likelihood the central bank will reduce its one-year loan rate on Thursday, with banks expected to lower their lending rates shortly after.”

A key part of the proposed stimulus package involves supporting the real estate market. The plan has yet to be finalized and may be subject to change. The State Council may discuss the policies as soon as this Friday but it’s unclear when they will be announced or implemented, the people said. Further details on the scope of the proposed stimulus package weren’t immediately available according to Bloomberg.

Oil also was under pressure as talk began to circulate of a big crude oil increase this week as imports were thought to be up and exports thought to be down. It will be enhanced by a US SPR crude oil release of 1.9 million barrels that the US will buy back next week.

Yet despite the oil price crash refining margins held up well as far as refiners are concerned, demand for their products is great. And if demand in the US is so bad why are gasoline prices not plummeting?

Our good buddies at GasBuddy wrote yesterday that “the nation’s average price of gasoline has rebounded, rising 5.6 cents from a week ago to $3.57 per gallon, according to GasBuddy data compiled from more than 11 million individual price reports covering over 150,000 gas stations across the country. The national average price of diesel has fallen 1.6 cents in the last week and stands at $3.87 per gallon. Patrick De Haan, head of petroleum analysis at GasBuddy said “We’ve seen some hefty gas price increases in several states in the Great Lakes and in Florida. These areas saw prices jump up in line with behaviors that see such jumps every couple of weeks. Exacerbating these routine jumps was government data that showed the third straight week with US gasoline demand over the critical nine-million-barrel-per-day mark, putting upward pressure on average prices in other areas as well.”

Natural gas is still trying to bottom even as summer temperatures in parts of the country fell more like fall. Zack reports that the market is getting support from stockpiles. Stockpiles held in underground storage in the lower 48 states rose 104 billion cubic feet (Bcf) for the week ended June second, below the guidance of 114 Bcf addition per a survey conducted by S&P Global Commodity Insights. However, the data included the impact of a reclassification of some of the commodity’s supply from working (available in the market) to base, which reduced working gas stocks by 14 Bcf. Excluding the adjustment, the build was 118 Bcf. The addition compared with the five-year (2018-2022) average net injection of 100 Bcf and last year’s growth of 99 Bcf for the reported week. The latest build puts total natural gas stocks at 2,550 Bcf, which is 562 Bcf (28.3%) above the 2022 level at this time and 353 Bcf (16.1%) higher than the five-year average.

Learn more about Phil Flynn by visiting Price Futures Group.