Written Commentary
CRUDE OIL
The action in the crude oil market today is once again disappointing for the bull camp as favorable Chinese economic data and a blow away record in Chinese refinery throughput should have fostered very positive energy demand view buying this morning. Chinese refinery throughput jumped to a fresh record just under 15 million barrels per day, but reports indicate the ramping up might simply be partially a push to build supply ahead of planned maintenance. Other modest bullish headlines discounted overnight included a decline in 2022 German oil production and a Reuters prediction of a decline in US EIA crude oil inventories of 2.5 million barrels this week. It should be noted that Chinese crude oil production last month increased by 2.4% from year ago levels which should dampen import expectations. At this point it is unclear if US threats against illegal at sea transfers from Russian oil tankers to buyer’s tankers will result in action from the US which could impact the energy markets. Given the action in crude oil yesterday, the market appears to be temporarily priced for the OPEC+ output cut and for an improvement in global energy demand.
PRODUCT MARKETS
With the gasoline market underpinned by US domestic supply and demand tightness, the hard washout on Monday caught many traders by surprise and May facilitate ongoing stop loss selling today. As indicated in crude oil coverage today petroleum market chatter on a strong northern hemisphere summer driving season has surfaced earlier than normal and that highlights the importance of rebuilding US gasoline supplies early which remain nearly 11 million barrels below year ago levels. Over the prior four weeks US implied gasoline demand readings have been strong at 8.96, 9.14, 9.29, and 8.936 million barrels per day. This week’s Reuters poll projects gasoline inventories at the EIA to decline by 1.9 million barrels.
NATURAL GAS
While it is possible June natural gas will regain the $2.50 level from cold temperatures and ongoing hope of record US export flow, the $2.50 level presents credible resistance, and traders expect record US gas production this month. Limiting the upside in natural gas is strong lower 48 states production in April which is running above March and could approach the January record at 100.4 bcfd. On the other hand, the Freeport LNG export facility is reportedly back at capacity export levels which will likely produce another US export record this month.
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