Written Commentary
CRUDE OIL
Crude oil prices are flat to marginally lower heading into the US trading hours, with global equity markets lower and the US dollar stronger. The outside market tone saw the Bank of Japan raise interest rates overnight as expected, and a German sentiment reading earlier this morning came in ahead of expectations, and that’s fueled upside in the US dollar into a new 12-day high. An added headwind facing the oil market this morning is talk of a meeting between Israeli, Qatar and Egyptian officials to broker a Gaza truce in exchange for a hostage release. In the meantime, crude oil draws underlying support from upbeat economic readings from China and the US in previous sessions, which stokes intermediate oil demand prospects. Additionally, recent Ukrainian drone strikes on Russian oil infrastructure is said to have taken an estimated 600,000 barrels of Russian refining capacity offline. JPMorgan Chase estimates 900,000 barrels a day of Russian oil refining capacity has been knocked offline, and repairs could take “several weeks, if not months.” Support is coming from an EIA report showing record us oil exports in 2023 at an average rate of 4.1 million barrels per day and reduced oil export flows out of Iraq and Saudi Arabia.
PRODUCT MARKET FUNDAMENTALS: May RBOB prices are a little weaker to start this morning after yesterday’s drive above $2.75 and into another new contract high. A tight US gasoline supply situation supports RBOB, with inventories sitting at 2.6% below their 5-year average for this time of the year at 234.083 million barrels. This is the lowest level inventory reading since November. There’s concern about the tight US gasoline supply situation heading into the US driving season and gasoline crack spread into their highest level since August. A report late yesterday from AAA indicated that US gasoline pump prices were at their highest seasonal average in two-years.
NATURAL GAS
May natural gas prices continue to coil inside of a rather tight $0.13 range heading into the US trading session. The market drafted support in the previous session on weather reports that showed cooler temperatures in the US east coast into the March 23 through 27 time frame. There’s also talk that US house republicans launched another probe into the Biden administration’s pause on LNG export approvals. The latest from the US energy secretary is that the pause in US LNG export flows is temporary, and that could provide a measure of support to near term natural gas pricing.
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