Written Commentary
CRUDE OIL
May Crude Oil was lower early Friday after the US issued a 30-day waiver for countries to buy sanctioned Russian oil and petroleum products currently stranded at sea. The Russian presidential envoy said the waivers would affect 100 million barrels of Russian crude, equal to almost a day’s worth of global output and said further sanctions relief was inevitable. Last week US Treasury issued a 30‑day waiver allowing only India to buy Russian oil stuck at sea. Yesterday the US said it would release 172 million barrels of oil from the Strategic Petroleum Reserve, and the International Energy Agency agreed to release a record 400 million barrels of oil from strategic stockpiles, including the US contribution. The released help, but one cannot but feel this is a stopgap against the blockage of some 20% of global supply via the Strait of Hormuz. An announcement from Iran’s new Supreme Leader said they will keep the Strait of Hormuz shut as leverage against the US and Israel. Video showing two fuel tankers on fire in Iraqi waters drove home the vulnerability of oil supply from the Persian Gulf.
PRODUCTS
Product prices eased off their highs early Friday after the US announced more waivers on Russian oil sancitons. Tightness in refined products is threatening into a serious emergency for importing nations like Australia, Indonesia and New Zealand, according to a story in Reuters. Refineries in Asia are cutting processing rates and some countries are starting to restrict fuel exports to ensure ample domestic supplies. The situation could get worse if countries start to hoard fuel. The forecast for a winter storm/extreme cold over the central US this weekend also support demand as well.
NATURAL GAS
May Natural Gas was lower early Friday, perhaps in sympathy with decline in other energy products. Some 20% of global LNG exports have been blocked due to the closure of the Strait of Hormuz, but US price gains are limited by fact that US LNG exports are already near maximum levels. Wintry weather this weekend and into next week across the central US may provide a late-season boost to heating demand. However, the 6-10 and 8-14-day forecasts show normal and above-normal temperatures dominating over most of the lower 48 states. LSEG projected average gas demand in the Lower 48 states, including exports, would jump from 112.6 bcfd this week to 125.0 bcfd next week.
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