CRUDE OIL
Crude oil traded in a tight range overnight, but it extended its recovery following bullish supply developments from the API report late yesterday. Iraq has blocked the flow of oil from Kurdistan into Turkey, which has added some supply anxiety to the market. Early today, there were reports that several oilfields in Kurdistan were being shut down due to the pipeline bottleneck. Although this would account for only 450,000 barrels per day, it will add to an already tight supply outlook for western Europe. Late on Tuesday, US Energy Secretary Granholm said that the US will start to buy oil to refill the SPR later this year, and this lent support to the market. China National Petroleum forecast a 6.2% increase in that nation’s 2023 crude imports, which indicates improving demand. A positive shift in global risk sentiment could also support crude oil this morning. After Tuesday’s close, the API survey showed US crude oil stocks fell 6.1 million barrels last week, which was a much larger decline than expected. Among the questions for today’s EIA report will be whether US crude oil exports remain strong and whether refinery utilization climbed above 90%.
NATURAL GAS
Demand concerns continue to weigh on natural gas prices. Above average domestic storage levels at the end of the North American winter continue to weigh on prices as the market approaches its shoulder demand season. Domestic gas production remains robust, but LNG exports are still below capacity with the Freeport terminal coming back on-line. The 6-to-10 and 8-to-14-day forecasts show below normal temperatures from the Plains west to the Pacific Coast but above normal temperatures from the Mississippi River east to the Atlantic Coast. Unless there are fresh supply bottlenecks in Asia or western Europe, natural gas could continue to press the downside today.
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