May WTI crude oil (CLK23) this morning is up +1.16 (+1.42%), and May RBOB gasoline (RBJ23) is up +0.47 (+0.16%). May Nymex natural gas (NGK23) is down -0.093 (-4.25%).
Crude oil and gasoline prices this morning are moderately higher, with crude climbing to a 4-1/2 month nearest-futures high and gasoline climbing to a 5-1/2 month high. A weaker dollar today is bullish for energy prices. Also, tightness in global oil supplies is supporting crude prices after OPEC+ announced a surprise cut in oil production last Monday and as 400,000 bpd of Iraqi crude oil exports remain halted.
May nat-gas prices this morning are sharply lower. Ample U.S. nat-gas supplies are outweighing record U.S. LNG exports and are weighing on prices. In addition, U.S. nat-gas inventories were 20% above their 5-year average as of March 31. Also, ramped-up U.S. nat-gas production is bearish for prices, with today's lower-48 state U.S. dry gas production up +3.0% yy/ at 99.2 bcf.
The ongoing halt of Iraqi crude exports from the Turkish port of Ceyhan is tightening global oil supplies and is bullish for crude prices. The Turkish government said it wants to negotiate a $1.5 billion settlement that it has been ordered to pay before allowing Iraqi crude exports to resume through its pipeline. Oil exports of 400,000 bpd from the Turkish port of Ceyhan have been halted since March 25 after Iraq won an arbitration case 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.
Crude prices surged last Monday after OPEC+ announced a surprise oil production cut of more than 1 million bpd starting May 1. Saudi Arabia said the cuts were a "precautionary measure aimed at supporting the stability of the oil market." OPEC Mar crude production fell by -80,000 bpd to 29.16 million bpd.
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 reported Monday that the amount of crude stored on tankers that have been stationary for at least a week rose +6.8% w/w to 112.83 million bbl in the week ended April 7.
Rising crude demand in India is bullish for oil prices. India's oil ministry reported on March 22 that India Feb crude oil imports rose +8.5% y/y to 19.1 MMT, the most in seven months.
Today's weekly EIA inventory report was mixed for energy prices. On the bullish side, EIA distillate stockpiles fell -606,000 bbl, a larger draw than expectations of -200,000. Also, crude supplies at Cushing, the delivery point of WTI futures, fell -409,000 bbl to a 3-month low. On the bearish side, EIA crude inventories unexpectedly rose +597,000 bbl versus expectations of a -1.05 million bbl draw. Also, EIS gasoline supplies fell -330,000 bbl, a smaller draw than expectations of -1.9 million bbl.
Today's EIA report showed that (1) U.S. crude oil inventories as of April 7 were +2.8% above the seasonal 5-year average, (2) gasoline inventories were -6.9% below the seasonal 5-year average, and (3) distillate inventories were -11.6% below the 5-year seasonal average. U.S. crude oil production in the week ended April 7 rose +0.8% w/w to 12.3 million bpd, only 0.8 million bpd (-6.1%) below the Feb-2020 record-high of 13.1 million bpd.
Baker Hughes reported last Thursday that active U.S. oil rigs in the week ended April 7 fell by -2 rigs to 590 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.
