Written Commentary
NATURAL GAS
Natural gas prices extended this week’s pullback overnight and have reached a 2-week low with the market pressured by lukewarm demand and rising supply. The EIA’s weekly natural gas storage report showed an injection of 84 bcf which was higher than trade forecasts. Total storage stands at 2,795 bcf, or 26.5% above the 5-year average. Over the last four weeks natural gas storage has increased 311 bcf. Furthermore, US dry gas production remains well below its record highs but has climbed back above the 98 bcf per day level, and that has added to the pressure on natural gas prices this week. US LNG exports have climbed back above the 13 bcf per day level, but that provided little support to the natural gas market. The latest 6 to 10 day outlook has above-normal temperatures on the East Coast, Gulf Coast and Rockies west to the Pacific Coast, and that may ramp up power plant and air conditioning demand over the next few weeks. Unfortunately for the bull camp power to the very critical Freeport LNG export plant in Texas has seen interruptions with capacity yesterday at only 81% which will back up supply in the US. Fortunately for the bull camp Indian LNG imports for May are projected to be the highest since 2020 following a pattern of extreme heat.
CRUDE OIL
There is a negative bias extending in crude oil today from a slight risk off global economic vibe, disappointing Chinese PMI data overnight, and from ongoing weakness in global equity markets. Adding to the bear tilt is news that Japanese April crude oil imports declined by 8.6% on a year over year basis and a 22% rise in weekly Shanghai medium sour crude stockpiles. However, it is possible the market will see sellers discouraged today by the prospect of supportive news from the OPEC+ virtual meeting this weekend. On the other hand, it is possible that a significant extension of restraint into next year could spark renewed tightening fears as efforts to end fossil fuel use will likely lower production outside of OPEC. While the weekly decline did not match the size of the API survey, US EIA crude stocks reached a 5-week low this week as refinery utilization reached its highest level since August and US refinery net input climbed above 17 million bpd for the first time since December 2019. US crude oil production has been stable around the 13.1 million bpd level since March while US crude oil exports have tapered off from their mid-April highs, both of which reflect lukewarm global demand.
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