Written Commentary
CRUDE OIL
The action in crude oil today is very disappointing to the bull camp given strong Chinese January and February crude oil imports. Chinese January and February crude oil imports increased by 3.5% over last year but that bullish headline was offset by a 7.1% increase in Chinese oil exports in January and February. Furthermore, the trade has indicated the Chinese trend of softer oil imports has remained in place, but some suggest that is the result of a typical soft seasonal pattern. On the other hand, the trade has been presented with fresher positive Chinese demand news from reports that VLCC shipments from the Middle East to China have increased this week. Unfortunately for the bull camp, the oil markets have not responded positively to a revival of US rate cut hopes and more importantly in the face of a significant decline in the dollar which should help US export pricing. In fact, with the Saudis raising their pricing to Asia significant declines in the dollar ahead should boost US sales significantly. Apparently slightly bearish EIA crude oil inventory data sparked only a temporary dip which bodes well for the bull camp. Fortunately for the bull camp, EIA gasoline, distillate, and diesel stocks at the EIA fell sharply, US implied gasoline demand jumped above 9 million barrels per day for the first time since December and the US refinery operating rate jumped 3.4% in one week.
NATURAL GAS
While there could be a major paradigm shift in natural gas operating under the surface, we are not privy to that issue yet. While seeing Chinese January through February coal imports rise by a startling 23% on a year-over-year basis produces positive Chinese economic chatter, that news could also suggest natural gas as a feedstock for Chinese electric generation has lost some market share. Furthermore, above normal temperatures are returning in the 6 to 10-day forecast for the US prompting views that a late season jump in heating demand and a sharp drawdown in US natural gas inventories is becoming very unlikely.
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