Written Commentary
CRUDE OIL
April Crude Oil was higher early Monday and was close to taking out Friday’s eight month high. The market is still finding support on expectations that the US could initiate an attack against Iran, now that the build-up of US forces have been put in place around the Persian Gulf. President Trump said last week that “really bad things” would happen if Iran does not come to an agreement to curtail its nuclear program, but he also mentioned a deadline of 10 to 15 days. One concern is that Iran may respond to US attacks by closing the Strait of Hormuz, through which about 20% of global oil supply passes. The next round of talks between the two countries is scheduled for Thursday. The Baker Hughes rig count showed the number of US oil rigs in operation last week was unchanged at 409. This was down from 481 rigs a year ago and below the five-year average of 482.
PRODUCTS
Like crude oil, the products were under pressure early Monday but recovered most, if not all, of their losses as the session progressed. On Friday, nearby RBOB reached its highest level since September 29 and ULSD its highest since January 30. Both markets saw larger than expected US stock draws last week, even with a significant increase in refinery runs, which meant a jump in implied demand. US gasoline stocks are still hovering around six-year highs, but they tend to peak this time over year. The spring break travel season approaches, which will boost gasoline demand. The winter storm in the northeast may provide a temporary interruption in gasoline consumption, but it can also boost heating demand.
NATURAL GAS
April Natural Gas started out higher early Monday but gave up a good portion of the gains as the session progressed. A winter storm brought heavy snow to the northeast over the weekend, but the area is expected to quickly warm up over the next couple of days. The 6-10- and 8-14-day weather maps showed above normal temperatures across most of the lower 48, except for some areas of the northern Plains, northern Midwest and New England, which are normal or below normal. On Friday, LSEG said average gas output in the Lower 48 states has climbed to 108.7 billion cubic feet per day so far in February, up from 106.3 in January and still short of the record 109.7 bcfd from December.
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