June WTI crude oil (CLM23) this morning is down -0.58 (-0.82%), and June RBOB gasoline (RBM23) is down -1.22 (-0.50%). June Nymex natural gas (NGM23) is up +0.033 (+1.51%).
Crude oil and gasoline prices this morning gave up an early advance and are moderately lower on today's rally in the dollar index to a 1-month high and a decline in U.S. consumer sentiment to a 6-month low. Crude prices today initially moved higher on concerns about tight global supplies as Iraqi crude exports of around 500,000 bpd remain halted from the Turkish port of Ceyhan. Also, the U.S. Energy Department said it will soon start buying oil to refill the Strategic Petroleum Reserve (SPR).
Jun nat-gas is moderately higher this morning as above-normal temperatures have increased demand from electricity providers to power air-conditioning. According to BNEF data, gas demand for power generation is at the highest seasonal levels since at least 2014. Gains in nat-gas are limited after the Commodity Weather Group said below-normal temperatures would move into the northeastern and southern U.S. states from May 17-21.
A bullish factor for crude was U.S. Energy Secretary Granholm's comment late Thursday that the U.S. aims to start buying crude to refill the SPR after the conclusion of a 26 million bbl sale of SPR crude is scheduled to finish in late June.
A bearish factor for crude is the deterioration of U.S. consumer sentiment after today's University of Michigan U.S. May consumer sentiment index fell -5.8 to a 6-month low of 57.7, weaker than expectations of 63.0.
Strength in fuel demand in India, the world's third-largest crude consumer, is bullish for prices after India's Apr diesel consumption jumped +8.6% y/y to a record 7.82 MMT.
Crude has support on reduced Canadian crude output after wildfires in Alberta halted about 145,000 bpd of crude production from several Canadian crude producers. However, firefighters are progressing in battling the fires, and crude output should soon resume. The number of wildfires has fallen to 73, down from more than 80 on Thursday and more than 100 earlier in the week.
In a bullish factor, Vortexa reported Monday that the amount of crude stored on tankers that have been stationary for at least a week fell -16% w/w to 78.03 million bbl in the week ended May 5 to the lowest in 3 months.
Signs of stronger Chinese fuel demand are supportive for crude prices after China’s Ministry of Culture and Tourism reported last Thursday that the number of domestic trips made over the five-day Golden Week holidays reached 274 million, up +19% from the pre-pandemic level in 2019 and almost +71% higher than last year.
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 500,000 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 oil prices are being undercut by signs that Russia has not delivered on its threat to cut crude output. Tanker-tracking data from Bloomberg shows Russia's crude exports jumped above 4 million bpd in the week of April 28. Russia has halted the publication of crude and condensate production data in an attempt to disguise if it has actually cut crude output.
Crude prices surged on April 3 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.
Wednesday's EIA report showed that (1) U.S. crude oil inventories as of May 5 were -1.2% below the seasonal 5-year average, (2) gasoline inventories were -6.8% below the seasonal 5-year average, and (3) distillate inventories were -16.1% below the 5-year seasonal average. U.S. crude oil production in the week ended May 5 was unchanged 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 Friday that active U.S. oil rigs in the week ended May 5 fell -3 to 588 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.
