Written Commentary
CRUDE OIL
May Crude was higher this morning after trading lower overnight on news that crude oil exports from Iraq’s Kirkuk fields to Turkey’s Ceyhan port have resumed via pipeline after Baghdad and the Kurdistan Regional Government agreed on Tuesday to restart flows. Sharply higher gasoline and diesel prices may be leading crude oil higher for a change. There is some speculation that Iran’s repeated attacks on Persian Gulf have backfired and have strengthened their resolve to oppose Iran rather than encouraging the US and Israel to negotiate a cease fire. A senior Emirati official said Tuesday that the UAE may join a US-led effort to protect shipping in the Strait of Hormuz. The US military said on Tuesday it had targeted sites along Iran’s coastline near the Strait of Hormuz with powerful “bunker buster” bombs. Saudi Arabia will host a meeting of foreign ministers from a number of Arab and Islamic countries in Riyadh on Wednesday evening to discuss ways to support regional security and stability. In the meantime, the war continues, and the Strait remains essentially blocked.
PRODUCTS
May RBOB as taken out the March 9 high and traded to new contract highs, and May ULSD is close to doing so as well, as global product supply has felt the effects of the Iran war faster than crude oil due to restrictions on exports from key refining countries. API gasoline stocks were -4.56 million barrels for the week ending March 13 versus an average trade expectation from a Reuters poll of -1.6 million, and distillates stocks were-1.39 million barrels versus -1.5 million expected. AAA reported that average US gasoline prices reached $3.79/gallon on Tuesday, their highest since October 2023.
NATURAL GAS
May Natural Gas fell to its lowest level since February 27 early Wednesday but then reversed to higher on the day. The US natural gas market remains insulated from higher international prices because US LNG exports are close to their limit until the next plant comes on line. LSEG estimates that average gas flows to the nine big US LNG export plants are around 18.5 bcfd so far in March, down from a record 18.7 bcfd in February. The winter weather moving across the northern US may have brought about a temporary reduction in output in North Dakota due to freezing wells and a temporary reduction in demand in some areas that lows power from the storms. On the other hand extreme heat in the southwestern US (Los Angeles at 99 degrees F) could boost cooling demand.
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