Written Commentary
CRUDE OIL
April Crude Oil opened lower overnight but is back near unchanged this morning. The market has poked below the February consolidation lows to its lowest level since December 30. The trade awaits news on progress on a Ukraine/Russia peace agreement. The prospect of the US dropping sanctions on Russian oil pressured the market last week on ideas is would open up more supply. OPEC+, which includes Russia, is scheduled to start unwinding some of its production curbs in April. They are currently holding back about 5.85 million barrels per day, or 5.7% of global demand. The group has postponed plans to do so several times, and they may decide to do that again if demand looks weak. European officials said yesterday EU leaders will meet for an extraordinary summit on March 6 to discuss additional support for Ukraine, European security guarantees, and how to pay for European defense needs. An Iraqi oil ministry official said yesterday that Iraq will export 185,000 barrels per day of crude oil from Kurdistan through the Iraq-Turkey pipeline once oil shipments resume. Friday’s Commitments of Traders report showed managed money traders were net sellers of 18,907 contracts of crude oil for the week ending February 18, reducing their net long to 103,330. This is near the lower end of the range of the past 10 years.
NATURAL GAS
Natural Gas prices reached 26-month highs last week but they have started off on a weak note today. The April contract gapped lower overnight and fell to its lowest level since Tuesday. After several weeks of colder than normal temperatures in the US, mild weather has returned. The 6-10-day forecast has above normal temperatures covering most of the lower 48, with mostly normal elsewhere. The 8-14 day has normal temperatures in the middle of the US with below normal in the west and New England. Analysts at Kpler are saying North Asia’s relatively mild winter could lower their imports of LNG to their lowest levels in two years in February. They are estimating arrivals at 20.7 million metric tons for February, which would be down from 24.59 million in January and 22.67 million in February 2024. Friday’s Commitments of Traders report showed managed money traders were net buyers of 30,086 contracts of natural gas for the week ending February 18, increasing their net long to 103,867. This was well below the record net long of some 250,000 from 2018.
PRODUCT MARKETS
April ULSD gapped lower this overnight to trade to its lowest level since February 13 but was back near unchanged this morning . The return of milder weather to the lower 48 may be easing demand expectations for heating oil, but New England is expected to stay colder than normal, if not as extreme as it has been, and this could keep their needs elevated. Friday’s Commitments of Traders report showed managed money traders were net sellers of 1,993 contracts of ULSD for the week ending February 18, reducing their net long to 11,872. This was close to a flat position.
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