Oil Higher As Peace Deal Dims

CRUDE OIL 

Oil prices were higher overnight but inside yesterday’s range as the prospects for a quick end to the Ukraine/Russia war dimmed after Russian President Putin said yesterday that while Moscow supported the US proposal for a ceasefire in principle, it sought a number of clarifications and conditions. Adding to support was the Trump administration saying yesterday that a license allowing energy transactions with Russian financial institutions had expired this week. Trade sources also told Reuter this week that Chinese state oil companies were shying away from Russian oil this month, as they assessed compliance following the US sanctions on Moscow from January. Crude oil fell under pressure yesterday after International Energy Association said in a report that expects global oil supply to exceed demand by around 600,000 barrels per day this year and that the surplus could grow by a another 400,000 bpd if OPEC+ extends its unwinding of cuts and fails to rein in overproduction and OPEC said OPEC+ output increased 363,000 barrels per day in February to 41.01 million bpd, due primarily to overproduction by Kazakhstan.

NATURAL GAS

Product prices are slightly higher this morning in line with the action in crude oil, but gasoline is in a slightly better posture, possibly due to the surprising decline in EIA stocks this week and the strong implied demand. Milder weather and spring break driving put gasoline back in the driver’s seat. However, gasoline stocks are still above a year ago and the five-year average. The 0.382 retracement of the selloff from the January high to this week’s low in May RBOB comes in at 2.2202, which would also close a gap from the open on March 5.

PRODUCT MARKETS

The weather forecast is bearish, perhaps a bit more than yesterday at this time, with the 8-14-day showing above normal temperatures across most of the US except for below normal in the state of Washington and  significant portions Oregon and Idaho. Vietnam is reviewing its duties on U.S. goods, including LNG, which could boost US exports and pull more gas from domestic supply. The EIA Gas storage report yesterday showed storage for the week ending March 7 at 1,698 bcf, -62 bcf from the previous week. This was within trade expectations of -79 to -36 and steeper than the average expectation calling for a 54 bcf draw. Storage was down -27.0% from a year ago and -11.3% below the five-year average versus -24.6% and -10.4% the previous week. The market is already in corrective mode after reaching new contract highs this week on peak tariff-war rhetoric between President Trump and Ontario Premier Doug Ford that included Canadian gas and electricity flows to the US. Ford met with the US Commerce Secretary yesterday and said the talks were “extremely positive,” but he gave no details.

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