Written Commentary
CRUDE OIL
The crude oil market saw a sharp reversal higher yesterday after the postponement of the reciprocal tariffs, but it has given back some of yesterday’s gains as the euphoria from the announcement has worn off. The reprieve may offer some support for crude oil after its unprecedented selloff, and yesterday’s lows could put a floor under the market for a while after a tsunami of bearish news this week, not only from the tariff turmoil but also increased production by OPEC+ and price cuts by Saudi Arabia. Yesterday’s EIA report came in bearish against expectations for crude oil, neutral for gasoline and bullish for diesel, but that news was quickly discounted and was eventually overwhelmed by the tariff reversal. Data from analytics firm Kpler put China’s Iranian oil imports at 1.37 million bpd in March, up from 747,000 bpd in February and a five-month high. Kazakhstan’s energy ministry has acknowledged that the nation exceeded its OPEC+ quota in March but and that it will fulfill its commitments in April and partially compensate for earlier overproduction. Flows through the Keystone oil pipeline that carries oil from Canada into the US have stopped after an oil spill in North Dakota.
NATURAL GAS
May Natural Gas saw a reversal higher from a two month lows yesterday in the wake of the tariff postponement. It is slightly lower this morning but is in the upper half of yesterday’s range. Expectations that US LNG exports will play a key role in upcoming tariff negotiations have helped this market avoid the steep selloffs that crude oil has experienced. Overnight, Taiwan’s economy minister said that negotiations with the US could include commitments to buy more LNG to help narrow the trade deficit. For the inventory report this morning , the Reuters poll calls for gas supply to be +50 billion cubic feet last week (range +44 to +58). The five-year average change is +24. As of last week, storage was 3.9% below the five-year average. If the number comes in as expected, that deficit would fall to 2.4% below. LSEG data indicated there were 78 heating degree days (HDDs) last week, compared with the 30-year normal of 99 for the period. The 6-10 and 8-14 day forecasts show below normal temperatures sticking around in the Northeastern quadrant of the lower 48, including the upper Midwest, Great Lakes, Mid-Atlantic and New England, which could keep heating demand higher than normal.
PRODUCT MARKETS
Yesterday’s recovery in RBOB was less impressive than the move in Crude Oil, but like Crude Oil, the market may see a floor at yesterday’s lows for a time. The EIA reports showed a drop in gasoline stocks of 1.6 million barrels last week, but that was close to expectations. However, implied demand was 8.425 million bpd, down from 8.495 million the previous week and 8.612 million a year ago.
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