June WTI crude oil (CLM23) this morning is down -1.51 (-2.06%), and June RBOB gasoline (RBM23) is down -3.37 (-1.37%). June Nymex natural gas (NGM23) is down -0.013 (-0.58%).
Crude oil and gasoline prices this morning are moderately lower. A stronger dollar today is weighing on energy prices along with weakness in stocks, which undercuts confidence in the economic outlook and energy demand. Also, signs of economic weakness in China are bearish for energy demand and crude prices.
Jun nat-gas this morning is moderately lower on weak export demand and mild U.S. temperatures, which curbs nat-gas demand from utility providers to power air conditioning. BNEF data shows estimated gas flows to U.S. LNG export terminals today fell to 12.2 bcf, down -7.6% w/w and the lowest in 6 weeks. Also, the Commodity Weather Group said mild to below-normal temperatures are expected across the northeastern and southern U.S. states next week. Losses in nat-gas prices are limited by reduced nat-gas output in Canada as wildfires in Alberta have led to the shutdown of many oil and natural gas wells and pipeline systems in western Canada.
Chinese trade data today showed China's Apr imports fell -7.9% y/y, weaker than expectations of -0.1% y/y, which bolsters concerns about China's economic recovery and is bearish for energy demand and crude prices.
Crude has support on a reduction of Canadian crude output after wildfires in Alberta halted about 145,000 bpd of crude production from several Canadian crude producers.
Strength in the crude crack spread is bullish for oil prices as the crack spread rose to a 1-1/2 week high today, encouraging refiners to boost their crude purchases and refine the crude into gasoline and distillates.
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.
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 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.
Last 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 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.
