Written Commentary
CRUDE OIL
The crude oil market is facing conflicting developments this morning with yesterday’s API crude stocks jumping by 3.03 million barrels largely offset by a plethora of bullish views predicting a “tight” global oil market this year. In fact, bullish sentiment overnight flowed from one of the largest hedge funds, from Morgan Stanley who raised their crude price target for the second quarter, chatter that European demand could surprise on the upside, a minimal decline in Mexican production, Spain jet fuel sales in February reaching the highest in two decades, and headlines indicating the world’s “biggest oil traders” are getting more bullish by the day. However, in addition to the jump in API crude oil stocks, the crude oil was presented with a 2.3% increase in European crude oil inventories on a week over week basis, the Chinese downgrade by Fitch dents demand expectations, Brent ETF holdings were reported to have seeing $398 million of outflows over the last three quarters and headlines from Bloomberg indicate traders are shifting from long futures to call options with strike prices at and above $100 per barrel. The latest EIA crude oil output forecasts raised US production from last month’s forecasted gain of 260,000 barrels per day to an increase in production of 280,000 barrels per day.
NATURAL GAS
While the natural gas market flared higher yesterday and posted the highest trade since March 11th, the market failed to hold that range up move giving off signs of a mini blowoff top. The EIA in its April outlook projected 2024 US dry natural gas production to reach 103.58 bcf/day versus the forecast last month of 103.35 bcf/day, but that increased supply was evenly offset by the EIA April forecasts calling for a gain in consumption from 89.92 bcf/day relative to the March forecast demand of 89.68 bcf/day. However, overall, the EIA expects annual US natural production this year will decline while they expect the US to post record demand. This week’s Reuters poll sees EIA natural gas inventories this week expected within a range of a withdrawal of 9 BCF to an injection of 14 BCF. We leave the edge with the bear camp.
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