Written Commentary
by Stephen Platt and Mike McElroy
Price Overview
Strength continued in the petroleum complex after a weekend that saw a deterioration in the talks between Russia and Ukraine, and attacks by Houthi rebels on Saudi refining facilities that temporarily slowed output. Crude oil ended the day with gains of nearly 7 dollars to settle at 109.97 basis May, while heating oil was up 15 cents and gas gained 13 cents. As expected, the moves appeared exaggerated in relation to news flow as decreased volume and open interest intensified price swings.
The market continued to digest IEA estimates that 3 mb/d of Russian crude could be shut-in starting in April, with concern intensifying as there was some talk by EU Ministers of banning Russian imports. Underlying support came from indications that OPEC+ compliance with output targets remains well above 100 percent. Every day that passes without an agreement between Russia and Ukraine makes a compromise more difficult as the conflict intensifies. Today’s push higher retraced 50 percent of the break since March 7th, with the next target on the upside in the 113.40 area which would mark a 68 percent retracement. Support should emerge in the 103 area on any pullback.
Wednesday’s weekly storage report is estimated to show crude oil stocks unchanged, while distillate stocks are expected to drop by 1.6 mb and gasoline is indicated lower by 2.1 mb. The refinery operating rate is pointing to a small drop of .1 to 90.3 percent.
Natural Gas
Prices traded lower for most of the session before finding late buying interest and eeking out a gain of just over 3 cents on the May contract to a settlement at 4.934. Early trade lacked much in the way of fundamental sway as weather reports coming out of the weekend were a mixed bag that signaled a finish to March that will keep it among the mildest in the last 70 years. Some of the weakness was likely the result of spillover from European prices working lower as flows through Nord Stream 1 remained steady and weather was mild. Production continued to creep higher, reaching the 93.7 bcf/d area over the weekend and adding minor resistance. Countering output gains were LNG flows again setting a record, reaching 13.7 mb/d on Saturday and holding above 13 through today’s early estimates at 13.5. Prices again probed above 5 dollars intraday as the 5.05 level looks like a key area, with a close through there likely leading to a test of the March highs near 5.20. Support should surface at the 9-day moving average near 4.77.
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