June WTI crude oil (CLM23) this morning is up +2.74 (+4.00%), and June RBOB gasoline (RBM23) is up +6.07 (+2.61%). June Nymex natural gas (NGM23) is up +0.025 (+1.19%).
Crude oil and gasoline prices this morning are sharply higher. A weaker dollar today is supportive of energy prices. Crude prices are also climbing after today's stronger-than-expected U.S. Apr payroll report eased concerns that the U.S. economy is headed for recession.
Jun nat-gas this morning is moderately higher. A broad rally in commodity prices today is supporting gains in nat-gas as commodity demand concerns eased after today's stronger-than-expected U.S. Apr payrolls report. Gains in nat-gas prices are limited by the outlook for milder U.S. weather to reduce heating demand for nat-gas. The Commodity Weather Group said above-normal temperatures are expected across the northern and central U.S. states from May 10-14.
Today's U.S. payroll report was bullish for energy demand and crude prices. Apr nonfarm payrolls rose +253,000, stronger than expectations of +185,000. Also, the Apr unemployment rate unexpectedly fell -0.1 to a 54-year low of 3.4%.
Signs of stronger Chinese fuel demand are supportive for crude prices after China’s Ministry of Culture and Tourism reported 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.
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 -7.2% w/w to 88.87 million bbl in the week ended April 28.
Strength in energy demand in India, the world's third largest crude consumer, is bullish for prices after India's Ministry of Petroleum and Natural Gas reported India's Mar crude processing rose +3.1% y/y to 23 MMT. Also, India's Mar crude imports rose +7.9% y/y to 20.5 MMT.
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 oil prices are also 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 April 28 were -1.9% below the seasonal 5-year average, (2) gasoline inventories were -6.2% below the seasonal 5-year average, and (3) distillate inventories were -12.5% below the 5-year seasonal average. U.S. crude oil production in the week ended April 28 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 Friday that active U.S. oil rigs in the week ended April 28 were unchanged at 591 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.
