Written Commentary
CRUDE OIL
The ability to hold yesterday’s upside extension in the face of a dramatic 8.5-million-barrel increase in API crude oil stocks, and in the face of expectations a weekly increase in EIA crude oil stocks of 2.6 million barrels highlights residual bullish control. After the close, the API survey said that US crude oil stocks had a weekly increase of 8.52 million barrels which was a much larger increase than trade forecasts. The ability for March crude oil to hold above the $77.00 level in the face of the much larger than expected inflow to API crude oil stocks yesterday is made more impressive by overnight news that crude oil storage in ARA facilities increased by 5.1% last week. Furthermore, ongoing strength in the US dollar, delayed US rate cut timing, and lingering doubt over positive 2024 OPEC global oil demand projections should dramatically increase overhead resistance in March crude oil at the $78.16 level. With US crude oil production and crude oil imports returning to pre-cold weather levels in last week’s EIA report, and crude oil refinery throughput breaking out down last week, the crude bulls will need very strong product implied demand readings later today.
NATURAL GAS
Natural gas prices overnight remained near yesterday’s latest new contract low move and have now declined by more than 20% in value since the end of January. Unfortunately for the bull camp, the net spec and fund short positioning in natural gas is not excessive yet with the latest reading showing a net spec and fund short 7,000 contracts below the largest spec short of 2024. However, March natural gas has lost nearly $0.35 since the COT report was measured potentially inflating the net spec and fund short to the largest level since April of last year. Therefore, mild US temperatures, a higher US dollar and a Reuters poll projecting EIA working gas in storage to decline minimally should leave the bear camp confident. The latest 6-to-10 and 8-to-14-day forecasts project above normal temperatures across many parts of the US. This should weaken near-term heating and power plant demand, and that has kept natural gas prices on the defensive this week. Furthermore, warmer weather has helped US dry gas production return close to record high levels while US gas in storage and European gas storage remain well above average for this time of the year, both of which continue to weigh on natural gas prices.
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