Written Commentary
CRUDE OIL
March crude oil is holding around the $73 area to start, with support coming from ongoing geopolitical risks, a positive reversal in Chinese shares overnight and fractionally lower US dollar. Reports overnight indicate ongoing geopolitical tensions in the Middle East, with further US and UK attacks on Houthi military sites. Reports of the US striking down two Houthi Sea drones in Yemen fuels a measure of support for crude oil pricing. Shares in China rallied overnight, supported by nation’s sovereign fund buying shares, as well as an ongoing commitment to continue buying shares. That along with a flat to lower US dollar lends support to pricing to start the US session. Meanwhile, the crude oil market will have an eye on headline flow from US Secretary of State Blinken’s visit to the Middle East, which includes a meeting with Saudi Arabia. There were reports that the Saudis will keep their crude oil prices to Asian customers unchanged during March, and that may reflect lukewarm demand from that region. Additional support comes from the largest inflow into the USO crude oil ETF in four months, as well as open interest in WTI at the highest level since July. A Reuters survey has a median forecast for US crude oil stocks to rise by over 2 million barrels last week, which would be a second weekly increase in a row. Temperatures across many regions of the US have been warmer than normal, and that may lead to weekly increases in crude oil refinery net input, production, and imports in Wednesday’s EIA weekly petroleum supply report. The EIA is scheduled to release its Short-Term Energy around midday.
NATURAL GAS
March Natural gas prices trade marginally lower to start US trading and inside of yesterday’s range. A measure of weakness comes from reports of soft power plant demand on the back of mild weather forecasts. The weather maps into the February 10-14 window across the Eastern US show above normal temperatures, with west coast and south-central US forecast slightly below average temperatures. Early expectations for this week’s EIA storage report are for below average inventory draw. Prospects for a return to colder temperatures later this month could provide some measure of support.
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