Written Commentary
CRUDE OIL
News that representatives from the US and China would meet in Switzerland over the weekend supported crude oil overnight, as this was seen as the first concrete evidence that the two sides are negotiating. There were some reports of “high hopes” for the outcome, but others view this a too optimistic and expect the negotiations to last for a while. For the EIA Report this morning, the Reuters poll has an expectations for US crude oil stocks to be -800,000 for the week ending May 2, with gasoline stocks expected to be -1.6 million and distillate stocks expected to be -1.3 million. Refinery runs are expected to be +0.8% to 89.4%. Sources told Reuters that US API crude oil stocks were -4.5 million, with gasoline stocks -2 million and distillates +2.2 million. The OPEC+ production increases and lower crude oil prices have led some to speculate that US production may be close to a peak. The EIA Short Term Energy Outlook forecasted global liquid fuels production to increase 1.3 to 1.4 million barrels per day in 2025 and 2026, led by production growth in countries outside of OPEC+. However the report also stated that this analysis was done before OPEC+ announced their production increase for June. EIA also expects US oil output to set a smaller record this year at 13.42 million bpd, down from its prior forecast of 13.51 million, with next year’ production at 13.49 million bpd, down from its prior forecast of 13.56 million. These estimates were made after the “liberation day” tariff announcements but before the 90-day suspension and the escalation of the China-US tariffs.
NATURAL GAS
The 6-10 and 8-14-day forecasts have below normal temperatures west of the Rockies, with above normal temperatures from the Plains to the East Coast., including some much above normal temps in the 6-10-day for the northern Midwest. There is very little “near normal” in the forecasts, and this leaves open the possibility of late season heating demand out west and possibly some early-season cooling demand east. Slovakia has apparently rejected the European Commission’s plan so phase out imports of Russian gas and other fossil fuels. The EIA Short Term Energy Outlook said the agency expects natural gas prices to increase in the coming months as the US exports more LNG and demand for natural gas from the electric power sector increases seasonally. Their forecast for the third-quarter Henry Hub price is almost double the price from a year earlier, and this contributes to their expectation of less natural gas use in the electric power sector on average this year compared with last year. The early Reuters poll for this EIA gas storage report has range of expectations calling for a net build of 96 to 107 bcf for the week ending May 2. The five-year average change is +82 bcf for the week.
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