Written Commentary
CRUDE OIL
Crude oil broke initially on news that Russia had agreed to a US proposal that Moscow and Kyiv temporarily stop attacking each other’s energy infrastructure, but the market recovered after Russia and Ukraine accused each other of breaking the cease fire. The API report yesterday afternoon was bearish for crude oil and gasoline and bullish for diesel, with crude stocks +4.59 million barrels last week versus a Reuters poll showing average trade expectations of +500,000. Gasoline stocks were -1.71 million barrels versus -2.2 million expected, and distillate stocks were -2.15 million versus -300,000 expected. The EIA report will be released this morning, and in addition to the expectations described above, refinery runs are expected to be unchanged at 86.5%. President Trump will host top oil executives and representative of API at the White House on Wednesday to discuss his plans to boost domestic energy production. The Nigerian President declared a state of emergency in the oil-producing Rivers State and suspended the state governor, his deputy and all lawmakers, citing vandalization of pipelines by militants and the lack of action taken by the governor to curtail them. Rivers is a major source of crude oil, and militants have in the past blown up pipelines.
NATURAL GAS
May Natural Gas is higher this morning but inside the relatively narrow range of the past week. News of a potential, limited cease fire in Ukraine was viewed as bearish as it could eventually open the door for a resumption of Russian natural gas flows into Europe, which could mean less demand for US LNG, but both sides accused each other of violating the agreement overnight. The Reuters poll has expectations for US natural gas storage ranging from a draw of 31 bcf last week to an injection of 3 bcf last week. The five-year average change for the week is -27 bcf. US gas storage is the lowest has been for this time of year since 2023. We are moving past the key heating season, but the 6-10 and 8-14 day forecast show below normal temperatures for Midwest and Great Lakes, which are key consumption regions.
PRODUCT MARKETS
API gasoline stocks came in at the bearish end of expectations with a smaller than expected decline. Last week’s surprisingly steep decline in EIA stocks and a strong implied demand number inspired a rally. Stocks are seeing a seasonal decline, but they are above year-ago and five-year average levels. API distillate stocks showed a surprising decline, which may have helped lift the market off its overnight lows.
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