Written Commentary
CRUDE OIL
May Crude Oil held last week’s low overnight and is higher this morning. The market held up fairly well in the face of heavy selling in equities yesterday, but then again crude oil prices had already declined 15% since mid-January at yesterday’s low. The US House is expected to vote this afternoon on a continuing resolution to fund the federal government, which could add to the recent volatile action in equities and commodities like crude oil if it fails to pass. Skepticism has emerged that that the tariffs on Canadian oil would have much effect on the flows into the US, as Canadian producers (and US refineries) are left with few other options in the near term, but the tariffs would will raise prices to US refiners and consumers, which could have at least a marginal effect on consumption. Peace prospects in Ukraine could lift the flow of oil from Russia. OPEC+ doing a small increase in production in April. This US leaning hard into slowing Iranian exports and increasing Iraqi flows via a pipeline from Kurdistan into Turkey. Chinese demand is still a concern. Chinese oil imports in the first two months of 2025 were down 3.4% from 2024, for a drop in daily imports of 520,000 barrels per day. For this week’s US petroleum supply reports, the early Reuters poll shows an average expectation for crude oil stocks to be +2.0 million barrels last week, with distillate stocks -1.0 million and gasoline stock -2.5 million. Refinery runs are expected to be +0.5% to 86.45.
NATURAL GAS
May Natural Gas was higher overnight following a wild move yesterday that saw the contract trade to new highs Sunday night but settle well off those levels in the wake of a steep selloff in the stock market. The weather forecast shows above normal temperatures continuing in the eastern half of the US out to March 24, with below normal west of the Rockies and normal in between. In other words, a mix that would point to “average” changes weekly supply. As of last week’s EIA report, US storage was down -24.6% from a year ago and -10.4% below the five-year average. In mid-January, storage was 1.2% above a year ago and 2.3% above average. For the report this week, the Reuters poll has analysts looking for it to be -36 to -79 bcf for the week ending March 7. The five-year average change for the week is -79 bcf. Cold temps this winter helped speed a decline in supply that was already underway thanks to an expansion in US LNG export capacity.
PRODUCT MARKETS
With the bounce off the lows overnight May RBOB appears to have rejected short term oversold levels, and it could see a move back to test 2.1600 today.
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