Written Commentary
CRUDE OIL
President Trump’s announcement yesterday that he will exempt automakers from his 25% tariffs on Canada and Mexico for one month (as long as they comply with existing free trade rules) has eased the market’s worst fears of an economic shakeup. The US Commerce Secretary has indicated that the 10% tariff on Canadian energy imports may also be eliminated. Reuters reported overnight that the Trump Administration is also considering a plan to stop and inspect Iranian oil tankers at sea under an international accord aimed at countering the spread of weapons of mass destruction, sources familiar with the matter told Reuters. A Reuters survey indicated OPEC oil output rose by 170,000 barrels per day in February to 26.74 million. Iranian exports increased 80,000 bpd to 3.30 million, the highest since 2018. Nigeria is pumping 70,000 bpd above its OPEC+ target. While the survey and January data provided by OPEC’s secondary sources show the UAE and Iraq are pumping close to the quotas, but IEA data has suggested they are pumping significantly more. Announcements earlier this week that OPEC+ planned to start lifting its quotas in April added to the selling pressure, as well as reports that Saudi Arabia is getting increasingly frustrated with other members exceeding their quotas. Yesterday’s EIA report was bearish against expectations for crude oil, and the selling took the market to its lowest level since September before making a significant bounce. Crude stocks were up 3.6 million barrels, higher than the expected increase of 300,000.
NATURAL GAS
April Natural Gas is lower this morning but inside yesterday’s range and still in the general vicinity of Wednesday’s highs. There are concerns that the tariffs imposed on Canadian energy would not only affect US natural gas supply but it would also mean reduced electricity imports, which would boost demand for natural gas used for electricity generation. For this EIA report today, the Reuters poll shows an average expectation calling for a net draw of 98 bcf last week (range -67 to -101). The five year average draw for the week is 97 bcf. As of last week supply was down 22.5% from a year ago and 10.5% below the five-year average. Average gas output in the Lower 48 U.S. states rose to 105.5 billion cubic feet per day (bcfd) so far in March, up from a record 104.7 bcfd in February, according to LSEG. US was on track to pull in around 8.2 bcfd of gas from Canada on Wednesday, down from 8.3 bcfd on Tuesday and from an average of 9.8 bcfd during the 11 days (February 21-March 3) before the tariffs were imposed. LSEG also forecast average gas demand in the Lower 48 states, including exports, to fall from 119.4 bcfd this week to 111.2 next week as warmer weather sets in.
PRODUCT MARKETS
Like crude oil, the products closed well off their lows yesterday and were near unchanged overnight. The EIA report showed gasoline stocks -1.4 million barrels last week versus -400,000 expected, and distillate stocks were down -1.3 million versus +200,000 expected.
>Interested in more futures markets? Explore our Market Dashboards 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.
