Written Commentary
CRUDE OIL
May Crude Oil was higher overnight on increasing tensions in the Middle East. President Trump said yesterday that he would hold Iran responsible for any attacks carried out by the Houthis, and he has vowed to continue US attacks on the Houthis unless they end their attacks on ships in the Red Sea. The Houthis have vowed to attack any Israeli-aligned ships. Israel hit Gaza with air strikes overnight, their first major attack since the ceasefire began in January. Palestinian health authorities are claiming 400 people were killed. Recall that the Israel/Gaza conflict of the past year and a half did not cause any significant interruptions in Mideast supply, but the Houthi attacks did extend shipping times from Asia to Europe as ships were forced to travel around the Cape of Africa. President Trump is talking today with Russian President Putin about ending the war in Ukraine. Progress on that front could open the door for increase Russian oil and gas supply. Venezuela’s state-run PDVSA has reportedly put together three operational scenarios, indicating it plans to continue producing and exporting oil.
NATURAL GAS
May Natural Gas is slightly higher this morning. US weather has turned slightly more supportive than yesterday, with the 6-10 and 8-14-day forecasts showing an area of below normal temperatures in the eastern Midwest and Great Lakes as well as Appalachia. However, above normal temps dominate from the Great Plains westward. The early Reuters poll has expectations for US natural gas storage ranging from a draw of 31 bcf last week to an injection of 3 bcf. Heightened tensions in the Mideast are supportive, as is a weaker dollar. We are moving past the period of peak heating demand and into the shoulder season.
PRODUCT MARKETS
May RBOB extended its rally overnight and reached its highest level since March 3. Gasoline has been leading the complex higher this week as the market transitions from heating season to driving season. Last week’s EIA report showed a strong drawdown in gasoline stocks and healthy implied demand. The trade is looking for gasoline stocks to fall another 2.4 million barrels in this week’s reports.
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