May WTI crude oil (CLK23) this morning is down -0.11 (-0.15%), and May RBOB gasoline (RBJ23) is down -4.034 (-1.50%). April Nymex natural gas (NGJ23) is down -0.020 (-0.99%).
Crude oil and gasoline prices this morning fell back from 2-week highs and turned lower on concerns of a slowing economy. Weekly EIA distillate stockpiles unexpectedly declined, which signaled lackluster diesel demand and weakness in trucking and manufacturing demand, signs of a slowing economy. A stronger dollar today is also weighing on energy prices. Crude prices today initially rose to a 2-week high after weekly EIA crude inventories unexpectedly declined.
Apr nat-gas prices this morning tumbled to a 2-1/2 year nearest-futures low as a warming U.S. temperature outlook signals weaker heating demand for nat-gas. Forecaster Atmospheric G2 said above-normal temperatures are seen blanketing the central and eastern U.S. from April 3-7. Nat-gas prices recovered from their worst levels on signs of strong foreign demand for U.S. nat-gas supplies after LNG net flows to U.S. LNG export terminals today rose to a record 14.2 bcf/day.
Crude prices have carryover support from Tuesday when the Iraqi government and Kurdish officials failed to agree on the resumption of around 400,000 bpd of oil exports from the Turkish port of Ceyhan. Iraq said Turkey should not allow Kurdish oil to be exported from the Turkish port without Iraqi government approval. Iraq won an arbitration case last week from the International Chamber of Commerce that said Turkey violated a 1973 pipeline transit agreement by allowing crude from the Kurdish region to be exported without Iraqi government consent.
The outlook for stronger Chinese crude oil demand is bullish for prices. China National Petroleum Corp, the country's largest refiner, predicts that oil demand in China may expand this year by +5.1% to 756 MMT as the country emerges from the pandemic. However, oil demand in China has recently been weak. China car sales in Jan-Feb fell -9.4% y/y and international flights from China were at only 22% of pre-pandemic levels as of March 16.
In a bearish factor, Vortexa on Monday reported that the amount of crude stored on tankers that have been stationary for at least a week rose +6.9% w/w to 96.53 million bbl in the week ended March 24.
Rising crude demand in India is bullish for oil prices. Last Wednesday, India's oil ministry reported that India Feb crude oil imports rose +8.5% y/y to 19.1 MMT, the most in seven months.
On February 1, the OPEC+ Joint Ministerial Monitoring Committee recommended keeping crude production levels steady as the oil market awaits clarity on demand in China and crude supplies from Russia. OPEC crude production in February rose by +120,000 bpd to 29.24 million bpd.
Today's weekly EIA report was mixed for crude and products. On the bullish side, EIA crude inventories unexpectedly fell -7.49 million bbl versus expectations of a +1.75 million bbl build. Also, EIA gasoline supplies fell -2.90 million bbl, a bigger draw than expectations of -2.25 million bbl, as U.S gasoline demand in the week of March 24 rose +2.1% w/w to a 3-month high of 9.145 million bpd. On the bearish side, EIA distillate stockpiles unexpectedly rose +281,000 versus expectations of -1.55 million bbl.
Today's EIA report showed that (1) U.S. crude oil inventories as of March 24 were +5.7% above the seasonal 5-year average, (2) gasoline inventories were -4.6% below the seasonal 5-year average, and (3) distillate inventories were -8.7% below the 5-year seasonal average. U.S. crude oil production in the week ended March 24 fell -0.8% w/w to 12.2 million bpd, only 0.9 million bpd (-6.9%) below the Feb-2020 record-high of 13.1 million bpd.
Baker Hughes reported last Friday that active U.S. oil rigs in the week ended March 24 rose by +4 rigs to 593 rigs, moderately below the 2-1/2 year high of 627 rigs posted on December 2. U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
