Written Commentary
CRUDE OIL
May Crude Oil is hovering near the upper end of yesterday’s breakout rally as the market waits for the new US tariffs that are due to be announced tomorrow. On the one hand, more US tariffs could interrupt supplies of certain crude oil types that US refiners are dependent upon. On the other hand, an escalating trade war could be damaging to the global economy and therefore pressure demand. The market also found support yesterday from US EIA monthly data that showed US crude oil production falling by 305,000 barrels per day to 13.15 million in January, the lowest since February 2024. A Chinese think-tank said it expects that nation’s oil consumption to increase 1.1% in 2025 to 765 million metric tons due to better economic growth and increasing demand for petrochemicals. This marks a change to the theme of lower Chinese demand due to a sluggish economy and the switch to more EVs. Russia has ordered the Black Sea terminal that handles Kazakhstan’s oil exports that are pumped by Chevron and Exxon Mobil to close two of its three moorings. The comes amid a standoff between Kazakhstan and OPEC+ over excess production and amid tensions between the White House and the Kremlin over the progress in peace talks. Over the weekend President Trump threatened secondary tariffs against nations that buy Russian oil.
NATURAL GAS
Colder weather is expected to return to the eastern half of the US over the next couple of weeks, but in the meantime, warm temperatures are expected to support an increase in US supply. For the EIA storage report this week, the early Reuters poll calls for a net injection of 18-39 bcf. The average change for the week is -20 bcf. As of last week, storage was down 24% from a year ago and 6.4% below the five-year average. An EIA report yesterday showed natural gas production in the Lower 48 states fell 1.7% to 116.3 billion cubic feet per day in January, down from a record 118.3 bcfd in December.
PRODUCT MARKETS
US refineries currently depend on imported oil, so new tariffs could make gasoline and distillates more expensive, at the outset.
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