WTI crude oil futures rose more than 2% to above $62 per barrel on Monday, following OPEC+’s decision to increase output in July, in line with market expectations. The group agreed on Saturday to add 411,000 barrels a day of supply, the third straight month of increase by the same amount, reinforcing a major strategic shift that has sent crude prices sinking. This move is perceived as a measure to discipline countries that have been overproducing, such as Iraq and Kazakhstan, while allowing oil producers like Saudi Arabia and Russia to win back market shares. Geopolitical risks also continue to provide bullish support to oil prices. Ukraine launched drone attacks on four military airports inside Russia, destroying over 40 warplanes, while Russia pounded Ukraine with missiles and drones. All this comes as the two sides prepare to meet in Istanbul for a second round of peace talks later today.
US natural gas futures dropped to $3.5/MMBtu, weighed down by reduced demand and lower gas flows to LNG export plants. So far in May, average feed gas to the eight major LNG facilities has declined to 15.1 bcfd from April’s record 16.0 bcfd, mainly due to maintenance at plants like Cameron, Corpus Christi, and Sabine Pass, as well as short outages at Freeport LNG. More maintenance is expected in June, especially at Sabine Pass. At the same time, US gas output has slightly fallen to 105.0 bcfd in May from April’s peak, mostly due to routine spring pipeline maintenance, including work on Kinder Morgan’s Permian Highway. Meanwhile, weather forecasts show warmer-than-normal temperatures into mid-June, which may support demand for natural gas used in air conditioning.
