Written Commentary
by market analysts Stephen Platt and Mike McElroy
Price Overview
The petroleum complex traded higher but found resistance just above 80 dollars basis April, settling with a gain of 93 cents at 79.13. Good buying interest developed in reaction to the DOE report which showed a smaller than expected build in crude inventories, while product stocks fell more than expected. In the background were ongoing concerns over the extension of OPEC production cuts along with the impact of enhanced US sanctions on Russian availability.
The DOE report showed crude inventories building by 1.4 mb. More concerning was the larger than expected decline in distillate and gasoline stocks of 4.1 and 4.5 mb respectively against expectations for a decline of 1.0 and 1.6. Refinery utilization rose by 3.4 to 84.9 percent. Total stocks of crude and products totaled 1,222.8 mb, down 5.5 from last week. Disappearance levels for all products rose to 20.3 mb compared to 19.5, with gasoline rising to 9.0 mb and distillate rising to 4.1 mb compared to 8.5 and 3.5 last week. Net export levels of crude and products declined to 1.9 mb. The cracks were mixed in response to the report, with the recovery in refinery throughput and approaching end of the maintenance period limiting support to margins in gasoline.
The market is responding to macro influences, with today’s weakness in the dollar and the easing in rates providing a tailwind to values as they retested the 80.60 area. The lack of downside follow-through sets up the potential for a breakout toward the 82.00-82.50 level if 80.60 gets tested again. Uncertainty surrounding the extension of OPEC+ production cuts, doubts that Israel will accept a 40-day ceasefire, and strength to the US economy will provide background support.
Natural Gas
Prices traded on both sides of unchanged, putting in an inside day on the charts before settling with a loss of 2.8 cents at 1.929. Support continued to be offered by a steady drop in production levels, which dipped below 100 bcf yesterday. On the other side of the coin, ample storage and above normal temperatures worked to deter any overzealous upside action. Tomorrow’s report is expected to show a 40 bcf withdrawl from stocks, well below the 5-year average decrease of 93. The 2-dollar level was tested again yesterday and remains key resistance. A push past there and a settlement above the 38 percent retracement level at 2.023 could portend additional gains, with 2.159 the next target. Support arises at 1.848, which could be a key level as a settlement much below there would violate recent uptrend channel support and trigger additional selling.
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