Written Commentary
CRUDE OIL
The selloff in crude oil continues, with the nearby contract falling to its lowest level since 2021. On top of the tariffs announcements this week that have sparked fears of global recession and lower oil demand, OPEC+ countries agreed on Thursday to advance their plan to phase out oil output cuts by increasing output by 411,000 barrels per day in May. This was much higher than the +135,000 bpd expected and caught the market by surprise. This also eases concerns over the potential loss of Iranian supply from US sanctions. Kazakhstan has been producing oil well above its quota recently, which has angered other members. United Arab Emirates, Nigeria and Gabon have also been overproduction, quotas but by much smaller amounts. The stronger than expected US jobs report this morning mitigates some of the worst fears about recession.
NATURAL GAS
May Natural Gas is lower today but it has avoided the steep selloff seen in the crude oil complex, possibly because traders view US LNG exports as a potential bargaining chip in tariff negotiations, which could allow for increased US exports. The EIA report yesterday showed US storage for the week ending March 28 at 1,773 bcf, +29 bcf from 1,744 the previous week. This was slightly above the average trade expectation of +25 and within the expected range of +18 to +39. Storage was down -21.5% from a year ago and -3.9% below the five-year average versus -24.0% and -6.4% the previous week. Warmer temperatures in recent weeks have allowed storage levels to climb off their seasonal lows earlier than in previous years. LSEG said yesterday that average gas output in the Lower 48 have fallen to 105.1 billion cubic feet per day so far in April, down from a record 106.2 bcfd in March. Daily output was on track to drop to five-week low of 104.6 bcfd on Thursday. The weather forecast show a warming trend in the eastern US after next week.
PRODUCT MARKETS
RBOB and ULSD extended their selloffs overnight in synch with crude oil, but the damage was not as severe. May RBOB held support at the September low of 2.0133. Additional support comes in at 1.9703 and 1.9297. Support for May ULSD comes in at 2.0431 and 1.8965.
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