Written Commentary
CRUDE OIL
Choppy on Tariffs and Ukraine Uncertainty
April Crude Oil is a little higher this morning after closing lower on Friday, as the market awaits tariffs on imports into the US from Canada and Mexico. Midwestern refiners are very dependent on Canadian crude, and the tariffs would raise the cost of refined products such as gasoline and diesel. However, the market also fears the tariffs would damage the global economy and oil demand. US Commerce Secretary Howard Lutnick appeared to pent the door for some movement on the tariff levels, saying yesterday that the levies on Canada and Mexico will take effect on Tuesday but that President Donald Trump will determine whether to stick with the planned 25%. Ukrainian president Volodymyr Zelenskiy said on Sunday that he believed he could salvage his relationship with President Trump. The blowup on Friday seems to increase the likelihood that the US will lift sanctions on Russia. The Baker Hughes rig count showed US oil rigs in operation were down 2 rigs last week at 486. This was down from 506 rigs a year ago and below the five-year average of 521. OPEC+ is approaching a deadline for deciding whether to go ahead with planned output increases on April 1. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 35,751 contracts of crude oil for the week ending February 25, reducing their net long to 67,578. This is their smallest net long since July, 2010.
NATURAL GAS
Another Warmup May Limit Recovery Rally
April Natural Gas gapped lower overnight an fell to its lowest level in two weeks, but it has since reversed and is higher on the day. The market gave back a significant portion of its recent gains last week as warmer weather settled over the US and took away some of the urgency from the recent sharp declines in US storage. Last week’s storage draw smaller than expected, but supply is now running 22.5% below a year ago. Aside from the weather, supply is also being pulled lower by increasing LNG export capacity. The Baker Hughes rig count showed US natural gas rigs in operation were up 3 rigs to 102 last week. This was down from 119 rigs a year ago and below the five-year average of 121. The 6-10 day forecast calls for a mix of above and normal temperatures across the central US, with below normal expected in New England, the West Coast and the Southwest. The 8-14 day has much above normal temperatures from the Plains to the Eastern Seaboard. Friday’s Commitments of Traders Report showed managed money traders were net buyers of 2,610 contracts of natural gas for the week ending February 25, increasing their net long to 106,477. This is their largest net long since February 2021.
PRODUCT MARKETS
Tariffs on Canadian and Mexican import will increase the cost of crude oil that US refiners depend upon. Friday’s Commitments of Traders Report showed managed money traders were net sellers of 17,993 contracts of RBOB for the week ending February 25, reducing their net long to 27,863. This is their smallest net long since October 2024. For ULSD, managed money traders were net buyers of 6,153 contracts, increasing their net long to 18,026. This is their largest net long since February 2024.
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