Written Commentary
CRUDE OIL
Crude oil price were higher early Monday on concerns that shut-ins in major crude producing areas in the US due to the winter storm would slow oil flows, but the market slipped to lower on the day as the session progressed. JPMorgan analysts said estimated that about 250,000 barrels per day of crude production had been lost due to the weather, including declines in the Bakken field in Oklahoma and parts of Texas. The Baker Hughes rig count showed US oil rigs in operation were up 1 rig to 411 last week. This was down from 478 rigs a year ago and below the five-year average of 474. Rigs in operation are the lowest for this point in the season since 2021.
PRODUCTS
March ULSD reached its highest level since November overnight, supported by the winter storm and severe cold that moved across the nation over the weekend. The cold weather boosts demand for diesel. There are also concerns about potential interruptions in refining activity, but so far they seem to be minimal. Like Crude Oil, March RBOB did not make it through last week’s highs.
NATURAL GAS
March Natural Gas extended its rally early Monday, reaching its highest level since December 8, after the winter storm and extreme cold arrived as expected over the weekend. The nearby contract reached its highest level since December 2022. On Saturday, US Energy Secretary Chris Wright issued an emergency order after grid operator PJM reported possible problems in meeting electricity demand. PJM is based outside of Philadelphia. There are also concerns about equipment freezing, causing interruptions in output. That and higher demand is expected to produce some significant withdrawals in US supply over the next couple of weeks.
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