Written Commentary
CRUDE OIL
The Russia/Ukraine war intensified over the weekend, and there was no sign of progress with cease fire talks, helping to send May crude higher overnight. The lack of progress toward peace has reignited talk of a full shutdown in Russian oil exports to Europe. The International Energy Agency has stated that next month the world will see 3 million barrels per day less supply because of the Russian embargo. OPEC Plus nations had 136% compliance with their production cuts during February, which resulted in those nations being more than 1 million barrels per day (bpd) below quota.
RBOB and ULSD extended their recovery moves over the weekend, following strong gains on Friday with strength overnight. Russia’s invasion of Ukraine has led to a sharp drop in their petroleum product exports into western Europe as well as a complete suspension of exports to the US, and that continues to be a source of support. Average US retail “pump” prices for regular unleaded gasoline have fallen more than 10 cents per gallon from their highs earlier in the month. With the spring break travel season now in full swing, prices may be close to a near-term floor.
NATURAL GAS
Natural gas is increasingly being seen as a bridge to clean energy. China in in the process of shifting their electrical generation from coal to liquefied natural gas (LNG). The reduction of Russian supply to the West has intensified the construction of US LNG export terminals. At present, we think US export demand is limited by capacity issues, not by a lack of interested buyers.
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