Written Commentary
CRUDE OIL
May Crude Oil was lower Monday after trading to new contract highs earlier in the session. News that Pakistan had presented US and Iran a framework of peace plan provided some hope that the Strait of Hormuz could be reopened. This followed another ultimatum from President Trump over the weekend that Iran must make a deal by the end of Tuesday to reopen the Strait or the US would start bombing energy facilities. The Pakistani-brokered plan proposes an immediate ceasefire, followed by negotiations on a broader settlement to be concluded within 15 to 20 days. Iran over the weekend struck petrochemical facilities and an Israeli-linked vessel in Kuwait, Bahrain and the UAE. Spot premiums for US West Texas Intermediate crude have jumped to all-time highs. Some vessels, including an Omani-operated tanker, a French-owned container ship and a Japanese-owned gas carrier, have passed through the Strait of Hormuz since Thursday, according to shipping data cited by Reuters, and Iran’s joint military command said Iraq would be exempt from any restrictions on transit through the Strait.
PRODUCTS
Like Crude Oil, may RBOB was lower early Monday, but unlike crude it did not reach new contract highs. Overnight. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 7,986 contracts of RBOB for the week ending March 31, reducing their net long to 64,328. Open ineptest and momentum indicators have been declining on the rally, but much rests on the prospects for peace in the Middle East. May ULSD reached new contract highs on Friday.
NATURAL GAS
May Natural Gas was higher early Monday after trading to its lowest level since January overnight. The overnight low allowed the market to close a gap from January 16, and this may present an opportunity for a rally. Reuters reported that two vessels loaded with LNG from Ras Laffan, Qatar, turned back after they moved eastward towards the Strait of Hormuz. Thursday’s EIA Gas storage report showed net storage for the week ending March 27 at 1,865 bcf, +36 bcf from the previous week. This was above the average trade expectation of +34 and within the range of expectations from +7 to +42. The five-year average change for this week is -10. Storage was up 5.2% from a year ago and 3.5% above the five-year average versus +4.9% and +1.0% the previous week. The Baker Hughes rig count showed US natural gas rigs in operation were up 3 rigs to 130 last week. This was up from 103 rigs a year ago and above the five-year average of 121. The 6-10 and 8-14 day forecast show above normal temperatures over most of the lower 48 states, which should allow for an early start for seasonal rebuilding. The new LNG plant coming on line will help offset some of that, eventually.
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