Written Commentary
CRUDE OIL
April Crude Oil was moderately higher overnight in the wake of yesterday’s announcement that the US was reversing a license for Chevron to operate in Venezuela. Chevron exports about 240,000 barrels per day from its Venezuela operations, which is more than a quarter of the country’s entire output. Ending the license means Chevron will no longer be able to export Venezuelan crude. If Venezuela’s state oil company PDVSA exports oil previously exported by Chevron, U.S. refineries will not be unable to buy it due to US sanctions. The gains in crude oil market overnight were checked by apparent progress towards a peace deal in Ukraine, after President Trump said the Ukrainian President Volodymyr Zelenskiy would visit Washington on Friday to sign an agreement on rare earth minerals. LSEG said that Asia’s January-February crude oil imports are on track to be 26.17 million barrels per day (bpd), down 780,000 bpd from the same period last year. China’s arrivals are estimated at 10.42 million bpd, down 840,000 bpd from the first two months of 2024. Yesterday’s EIA report showed a surprising decline for US crude oil stock last week, but crude stocks at Cushing OK and US distillate stocks saw significant increases. Refinery activity picked up more than expected.
NATURAL GAS
April Natural Gas is lower this morning after opening below the 9-day moving average, a line that the market had flirted with since Monday. (It closed below it yesterday.) The market rallied to its highest level in two years last week on the cold weather in the US, and the recent turn warmer has sparked some profit taking. For the EIA storage report today, the Reuters poll calls for a withdrawal of -287 to -263 bcf last week. The average change for this week of the year is -130 bcf. A withdrawal within the range of expectations would pull supply down 23%-24% from a year ago and 11%-12% below the five year average, which would be the biggest decline relative to a year ago since October 2021. The 6-10 and 8-14 day forecasts call for mostly normal to above normal temperatures across the US, with some colder than normal temps out west. The amount of gas flowing to the eight big US LNG facilities have risen to an average of 15.6 bcfd so far in February, up from 14.6 in January. The record 14.7 bcfd from December 2023 looks like it could be broken this month.
PRODUCT MARKETS
Product prices fell yesterday in the weak of a bearish EIA report and were modestly higher overnight but inside yesterday’s range. The EIA report showed US gasoline stocks increased 400,000 barrels last week versus expectations for an 800,000-barrel draw. East Coast inventories reached their highest level since June 2021, and Midwest stocks were at their highest in a year. Distillate stocks increased 3.9 million barrels last week versus expectations for a 1.5 million-barrel decline.
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