Written Commentary
CRUDE OIL
April Crude Oil is higher this morning and at its highest level since February 3. Hamas has postponed its next hostage release, which is a reminder that the current situation is just a cease-fire, not a cessation of hostilities. Also supporting the market are the ongoing the Russian and Iranian oil sanctions, which have moved Asian buyers to seek crude oil from the Mideast. However, Reuters reported an expected drop in Saudi Arabia’s shipments to China next month. Saudi Aramco will ship about 41 million barrels to China in March, based on a tally of allocations to Chinese refiners, which would be down from 43.5 million barrels in February. This would mark a second consecutive monthly drop. Last week, Aramco sharply increased crude prices for March shipments to buyers in Asia and other parts of the world. For the weekly US petroleum stocks reports, the early Reuters survey has an average expectation for US crude stocks to be +2.6 million barrels last week, with gasoline +1.6 million and distillates -900,000. Refinery runs are expected to be +0.3% to 84.8%.
NATURAL GAS
March Natural Gas is higher this morning, as a winter storm heading to the northern Plains and the upper Midwest provides a reminder that the draw season for natural gas supplies is ongoing. As of last week, US gas storage was down 7.2% from a year ago. The 6-10 and 8-14 day forecasts call for below normal temperatures across the eastern two-thirds of the lower 48 states, but a warmer than normal trend does develop west of the Rockies in the 8-14-day. For the weekly storage report, the Reuters survey has expectation for US natural gas storage to be -107 bcf to +91 bcf last week. Dutch and British wholesale gas prices have pulled back from two-year highs today, but concerns over storage levels and lower temperatures remain. Europe’s gas stores are currently 48.5% full, data from gas Infrastructure Europe showed. One analyst commented that storage fill levels could drop below 40% by the end of the heating season, which would accelerate their need to build storage. Yesterday Reuters reported that at least three vessels carrying LNG from Oman and Australia are heading west for delivery, with one sailing through the Red Sea, as high prices in Europe continue to draw more supplies. Ukrainian natural gas production facilities were damaged in a Russian attack on Ukraine’s central Poltava region overnight.
PRODUCT MARKETS
The product markets appear to be leading crude oil higher this morning.
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