Looking to the Futures

Crude oil futures (/CL) are rebuilding a risk premium as escalating U.S.-Iran tensions keep geopolitical concerns in focus.

With global supplies still tight, traders are focused on the latest crude and refined product inventory data for signs of whether demand is holding up and whether supply constraints are easing.

In its Weekly Petroleum Status Report, the Energy Information Administration (EIA) said crude oil stockpiles declined by 1.7-million barrels during the week ending July 10. This was below expectations for a 2.6-million barrel storage draw.

Oil inventories, excluding the Strategic Petroleum Reserve, stood at 409.7 million barrels, 6% below the five-year average.

U.S. oil production increased by 1,000 barrels per day last week, averaging 13.861 million barrels per day. This was 486,000 barrels per day higher than one year ago.

On the oil product side, distillate inventories increased by 4.6-million barrels, which was above expectations for a 100,000 barrel build. Distillate inventories are now 11% below the five-year average for this time of year.

Gasoline inventories decreased by 1.5-million barrels, which was above expectations for an 800,000 barrel draw. These stockpiles are now 8% below the five-year average.

EIA said gasoline production decreased from the previous week and averaged 9.6-million barrels per day. Distillate production increased last week, averaging 5.3-million barrels per day.

The agency also reported that U.S. ethanol production declined last week, averaging 1.04 million barrels per day. Expectations were for a decline to 1.08 million barrels per day.

U.S. ethanol inventories rose to 24.4 million barrels last week. Traders were expecting inventories of 24.5 million barrels.

Digging further into the EIA report, refinery utilization rose by 0.4 percentage points to 96.2% last week. Expectations were for an increase to 96.1%. U.S. gasoline demand fell by 1,000 barrels per day to 8.844 million barrels per day. Distillate demand declined last week, falling by 1.151-million barrels per day to 3.156 million barrels per day.

Oil storage in Cushing, Oklahoma, the delivery point for the WTI Crude Oil futures (/CL) contract, increased by 400,000 barrels last week to 20-million barrels.

The U.S. crude oil rig count remained unchanged last week at 445 rigs during the reporting period ending July 10. That is up 5% from a year ago according to energy services firm Baker Hughes’ North American Rotary Rig Count report.

This morning, U.S. stock index futures moved higher in the early hours with the S&P 500® (+0.37%), the Nasdaq-100® (+0.80%), the Russell 2000® (+0.43%), and Dow Jones Industrial Average® (+0.24%) all in the green.

In Asia, major indexes closed higher, with the Shanghai (+0.85%) and the Hang Seng (+2.36%) posting gains. The Nikkei was closed for a market holiday. 

In Europe, markets were mixed by midday, with the DAX (+0.15%) and the CAC (+0.21%) trading higher, but the FTSE (–0.36%) posting losses. 

Natural gas futures (/NGQ26) settled higher on Friday (+1.85%) as a smaller-than-expected storage build and firmer crude oil prices helped spark short-covering ahead of the weekend.

The U.S. Energy Information Administration (EIA) reported that working natural gas in storage increased by 41 billion cubic feet (Bcf) for the week ending July 10, slightly below expectations for a 43 Bcf build. Total inventories rose to 3,024 Bcf, leaving stocks 6.4% above the five-year average but still 0.7% below year-ago levels.

Looking ahead, the National Weather Service’s Climate Prediction Center expects temperatures across most of the Lower 48 states to range from near normal to above normal during the July 23–29 period. The Great Lakes and Northeast are the exceptions, with below normal temperatures expected during that time.

Copper futures (/HGU26) ended the trading week lower (–1.21%), with the lead-month September contract slipping to a one-week low. The red metal weakened alongside other industrial metals as escalating tensions in the Middle East fueled a broader risk-off tone on Friday.

Soybean oil futures (/ZLZ26) climbed to a six-month high Friday (+2.64%), supported in part by the recent rebound in crude oil prices above the $80 level. Soybean oil is a key input in biodiesel production, so strength in energy markets can provide a tailwind for bean oil futures by improving the relative appeal of renewable fuel demand.

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

Conference Board Leading Economic Index for June (interest rates) 

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)

Visit the Schwab.com Futures Markets page to explore the wide variety of futures contracts available for trading through Charles Schwab Futures and Forex LLC.