Written Commentary
CRUDE OIL
June Crude Oil avoided a another selloff overnight and held near unchanged from Monday. The market fell below the $60 level yesterday, which is near breakeven for US producers, but it closed above there and is holding that level for the most part so far today. Both sides of the US/China tariff debate escalated their rhetoric, with President Trump threatening to add additional tariffs in response to China’s and China vowing to ‘fight to the end.” But the US Treasury Secretary suggested this morning that the US is open to negotiations. OPEC+ accelerating the lifting of their output quotas last week added to concerns about oversupply. Saudi Arabia also lowered its price to Asia this week. Trump made a surprise announcement yesterday that the United States and Iran were set to begin direct talks on Tehran’s nuclear program, but Iran’s foreign minister said the discussions would be indirect. Easing tensions between US and Iran could mean more Iranian oil hitting the market, as US sanctions against Iran were one of the supporting factors for crude oil prior to the selloff. For this week’s inventory reports, the early Reuters poll calls for US crude oil stocks to show a net increase of 1.6 million barrels last week, with distillate stocks expected to be up 100,000 barrels and gasoline down 2.1 million. Refinery runs are expected to be up 0.4% to 86.4%.
NATURAL GAS
May Natural Gas is higher this morning following a selloff to its lowest level since February 19. The tariff panic finally got to the Natural Gas market but did nowhere near the damage it did to crude oil. Chinese buyers of US LNG are reportedly reselling cargoes in reaction to higher tariffs they are facing. China, the world’s largest buyer of liquefied natural gas, imported no US LNG during March, according to data from Kpler and LSEG (as reported by Reuters). The US accounted for about 5% of China’s LNG last year, according to Chinese customs data. For this inventory report this week, the early Reuters poll calls for natural gas supply to show a net injection of 44 to 58 billion cubic feet last week, with an average guess of +47 bcf. The five-year average change is +24. As of last week, storage was 3.9% below the five-year average. Mild weather in the forecast for the next couple of weeks point to further significant injections in the weeks ahead. LSEG is forecast average gas demand in the Lower 48, including exports, to fall from 109.4 bcfd this week to 98.7 bcfd next week. The average amount of gas flowing to the eight big LNG export plants so far for April is estimated at 15.7 bcfd, down slightly from a record 15.8 bcfd in March
PRODUCT MARKETS
The trade is looking for this week’s inventory reports to show a 1.6 million-barrel decline in gasoline stocks last week and a 100,000-barrel increase in distillates.
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