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Energy Brief for Apr 3.24

by market analysts Stephen Platt and Mike McElroy

Price Overview

The petroleum complex continued to trade firm, gaining 28 cents today to settle at 85.45. Heightened tension in the Middle East and a drone strike in Russia intensified supply risks over the past few days. OPEC+ agreed to maintain output cuts at their meeting today, and encouraged some countries to boost compliance, adding a supportive backdrop. The steady uptrend in values through the 84.00 level basis May since last week and Brent values reaching 90.00 today suggests the uptrend has reasserted itself with potential for values to reach the 88-90 area before more significant resistance develops. The DOE report failed to have a major impact despite an unexpected build in crude inventories of 3.2 mb as ongoing drawdowns in product inventories, and particularly gasoline, persisted. The build had a modest impact on the nearby backwardation of May-June crude, helping contract it from a premium of over $1.00 reached earlier in the session.

Underlying strength has been linked to announcements last week that Russia would reduce crude production and exports in April to around 9 mb/d from 9.5 to compensate for overproduction earlier in the year. Reports that Saudi Arabia will increase their May crude oil Official Selling Price to Asia by 20-30 cents in response to tighter supply of medium and heavy crude grades due to oilfield maintenance and tighter supplies from OPEC+ due to 2nd quarter production cuts also supported prices. Chinese factory activity expanded for the first time in 6 months to 50.8 from 49.1 showing growth despite ongoing challenges in the property sector. The OPEC+ agreement to maintain voluntary output cuts of 2.2 mb/d until the end of June is also restricting supply with some members indicating that they will compensate for overproduction the past few months by reducing output below targeted levels.

DTN May Crude Oil chart 4.3.24
DTN May Nat Gas chart 4.3.24

The DOE report showed commercial crude inventories rising by 3.2 million barrels which helped limit gains. Gasoline inventories fell more than expected at 4.3 mb while distillate declined 1.3. Refinery utilization was reported at 88.6 percent. Total disappearance was strong at 21.9 mb with gasoline demand at 9.2 mb while distillate supplied totalled 3.5 mb/d. Total net exports of crude and products fell to 1.7 mb/d from 2.5 last week.  

Natural Gas

After reaching new lows late last week, prices have recovered to begin to show signs of having put in a bottom. Today saw May register minor losses, settling 2.1 cents lower at 1.841. Recent strength was spurred by additional weakness in production, with output dropping below 99 bcf over the last two days. Weather has also been an underlying supportive influence, with cooler temperatures leading to slightly higher than normal demand to reduce multiple weeks of increases in excess storage. Tomorrow’s report is expected to show a 38 bcf withdrawal from stocks compared to the average for this time of year at 1 bcf. The bounce has held above the 9-day moving average for three sessions, marking a near term positive with a settlement above 1.90 likely leading to additional buying interest. The 9-day at 1.805 is initial support, with a move below there finding the next area of support near 1.75.

The authors of this piece do not currently maintain positions in the commodities mentioned within this report.

Charts Courtesy of DTN Prophet X, EIA, Reuters


Learn more about Stephen Platt here

Learn more about Mike McElroy here

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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