Written Commentary
CRUDE OIL
March Crude Oil is lower this morning but inside yesterday’s range. The API report yesterday was mixed, with US crude oil stocks +5.03 million barrels last week versus expectations calling for +2.0 million, gasoline stocks +5.43 million versus +500,000 expected and distillate stocks -6.98 million versus -1.5 million expected. ULSD is lower this morning despite the bullish distillates number. Perhaps the trade awaits the EIA number this morning. In addition to the stocks numbers, refinery runs are expected to be +0.2% to 83.7%. President Trump yesterday restored his “maximum pressure” campaign on Iran, which includes efforts to drive Iran’s oil exports down to zero in order to stop them from obtaining a nuclear weapon. EIA reports that Tehran’s oil exports brought in $53 billion in 2023 and $54 billion in 2024. There are ongoing concerns that at US/China trade war would dampen global demand, lackluster Chinese demand has been a bearish for the past six months or more.
NATURAL GAS
March Natural Gas is lower this morning but still well above Friday’s close. Perhaps the market is under pressure as it rethinks the implications of a US/China trade war. A Reuters story overnight surmised that the expansion of US LNG export infrastructure was based on increasing exports to China, which was thrown into question with China’s announcement of its retaliation yesterday. According to Reuters, China imported 4.3 million metric tons of US LNG last year, which represented 6% of total US LNG exports. Chinese state-owned companies have signed LNG supply deals for more than 20 million tons per year from existing and future US export terminals. There are eight LNG export terminals in the US, three under construction, and several others at various stages of development. On the other hand, at this point the US is the biggest supplier to the world. For the US storage report this week, the Reuters poll shows an average expectation for natural gas storage to be -182 to -138 billion cubic feet last week. The average change for the week is -169 bcf. As of last week’s report, US storage was -3.3% from a year ago and -2.6% from the five-year average. The return of cooler than normal weather for most of the lower 48 suggests there will be consistent withdrawals over the next couple of weeks.
PRODUCT MARKETS
The products have held up better than crude oil in the wake of the tariff retaliation threat from China, perhaps because the threat of higher prices for Canadian oil still linger despite their being put off for a month. The API report was bearish against expectations for gasoline, but April RBOB is focused on the implications of the Trump policies. April ULSD is slightly lower this morning despite a bullish API report, but it is inside the wild range of the previous two sessions.
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