Looking to the Futures

Crude oil futures (/CL) moved higher Friday as traders continued to monitor escalating tensions in the Middle East and potential risks to regional energy infrastructure. Reports that Yemen’s Iran-aligned Houthi rebels targeted Saudi Arabia’s southern Najran province kept supply concerns in focus, particularly as the group has increasingly threatened energy-related facilities and ports in the region.

In its Weekly Petroleum Status Report, the Energy Information Administration (EIA) said crude oil stockpiles increased by 2.5-million barrels during the week ending July 31. This was contrary to expectations for a 1.5-million barrel storage draw.

Oil inventories, excluding the Strategic Petroleum Reserve, stood at 407 million barrels, 6% below the five-year average.

U.S. oil production increased by 8,000 barrels per day last week, averaging 13.804 million barrels per day. This was 520,000 barrels per day higher than one year ago.

On the oil product side, distillate inventories declined by 3.5-million barrels, which was contrary to expectations for a 200,000 barrel build. Distillate inventories are now 12% below the five-year average for this time of year.

Gasoline inventories decreased by 1.6-million barrels, which was above expectations for a 1.3-million barrel draw. These stockpiles are now 7% below the five-year average.

EIA said gasoline production decreased from the previous week and averaged 9.6-million barrels per day. Distillate production also decreased last week, averaging 5.2-million barrels per day.

The agency also reported that U.S. ethanol production declined last week, averaging 1.107 million barrels per day. Expectations were for a decline to 1.11 million barrels per day.

U.S. ethanol inventories declined to 24.5 million barrels last week. Traders were expecting inventories of 24.6 million barrels.

Digging further into the EIA report, refinery utilization fell by 0.7 percentage points to 96.5% last week. Expectations were for a decline to 96.9%. U.S. gasoline demand fell by 10,000 barrels per day to 9.031 million barrels per day. Distillate demand rose last week, increasing by 417,000 barrels per day to 3.941 million barrels per day.

Oil storage in Cushing, Oklahoma, the delivery point for the WTI Crude Oil futures (/CL) contract, rose by 2.4-million barrels last week to 21-million barrels.

The U.S. crude oil rig count rose by one last week and now total 451 rigs during the reporting period ending July 31. That is up 10% from a year ago according to energy services firm Baker Hughes’ North American Rotary Rig Count report.

U.S. stock index futures were mixed early this morning, with the S&P 500® (+0.02%) and the Nasdaq-100® (+0.15%) higher, but the Dow Jones Industrial Average® (–0.14%) and the Russell 2000® (–0.28%) trading lower. 

In Asia, major indexes closed higher, with the Hang Seng (+1.05%), the Nikkei (+2.08%), and the Shanghai (+0.67%) in the green. 

European trading saw the DAX (+0.31%) and the CAC (+0.01%) higher but the FTSE (–0.31%) move lower by midday.

Natural Gas futures (/NGU26) settled higher Friday (+0.83%) as forecasts for above-normal early-August temperatures kept cooling demand in focus. Still, gains were limited by a comfortable storage cushion, with inventories remaining well above the five-year average and helping temper bullish momentum.

The U.S. Energy Information Administration (EIA) reported that working natural gas in storage increased by 33 billion cubic feet (Bcf) for the week ending July 31, slightly above expectations for a 31 Bcf build. Total inventories rose to 3,117 Bcf, leaving stocks 6.7% above the five-year average, though still 0.4% below year-ago levels.

Looking ahead, National Weather Service Climate Prediction Center forecasts point to near- to above-normal temperatures across much of the Lower 48 for the August 13–19 period, while cooler-than-normal conditions are expected across the Great Lakes and Northeast. The outlook could keep power-sector demand elevated, with traders watching whether upcoming storage injections stay modest enough to provide additional price support.

2-year Treasury futures (/ZTU26) moved higher Friday (+0.07%), reaching their highest levels in two weeks as Treasury prices rose and yields moved lower. The move followed a surprisingly weak U.S. Bureau of Labor Statistics employment report, which showed the economy lost 23,000 jobs in July versus expectations for an 80,000-job increase. The softer labor data prompted traders to reassess the likelihood of a Federal Reserve rate hike at the September Federal Open Market Committee meeting.

Gold futures (/GCZ26) finished the week higher (+2.33%) as a weaker U.S. Dollar Index and lower Treasury yields helped support demand for the precious metal. The move followed a disappointing U.S. non-farm payrolls report, which reinforced expectations that the Federal Reserve could take a more cautious approach at its September policy meeting. Softer yields tend to reduce the opportunity cost of holding gold, while a weaker dollar can make the metal more attractive to overseas buyers.

Major economic reports, trading events, and news items that could potentially impact specific futures markets:

Futures first notice day: August Live Cattle

3-and 6-month T-bills 

New futures products are available to trade with a futures-approved account on all thinkorswim platforms: 

• Ripple (/XRP)
• Micro Ripple (/MXP)
• 100 OZ Silver (/SIC)
• 1 OZ Gold (/1OZ)
• Solana (/SOL)
• Micro Solana (/MSL)

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