Written Commentary
CRUDE OIL
Oil prices were back at contract highs early Thursday in the wake of President Trump’s speech Wednesday night that dispelled hopes of a quick end to the war. That previous contract high at 113.41 was from March 9, that occurred on the news that Iran was blocking the Strait of Hormuz. In his speech, Trump said military operations would be intensified and he did not present offering a timeline for an end to hostilities. He also called on other nations to unblock the Strait of Hormuz. All of which suggests the Strait will remain blocked for the foreseeable future. The trade is on the lookout for a possible US ground assault this weekend, based on a pattern of previous US attacks occurring on weekends. The head of the International Energy Agency said on Wednesday that the IEA was considering a release of more strategic reserves, beyond the 400 million barrels of oil agreed to already.
PRODUCTS
Like crude oil, US product prices were higher early Thursday as Wednesday’s optimism of a quick end to the Iran war faded and with it hopes for an unblocking of the Strait of Hormuz. May ULSD took out last week’s contract high, and May RBOB was still shy of its contract high from Tuesday. Wednesday’s EIA report showed US gasoline stocks were -0.6 million barrels last week versus -1.9 million expected and distillate stocks -2.1 million barrels vs -0.6 million expected.
NATURAL GAS
High crude prices encourage oil production, which also means higher natural gas output that may not have a home. US exports are already running at the near capacity. A new plant coming on line this month will gradually increase the outtake. For the EIA gas storage report this week, the Reuters survey has an average expectation for a net injection of 34 billion cubic feet for the week ending March 27 (range +7 to +42).
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