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Refined Products

Recap: Oil prices turned lower on Thursday, weighed down by a persistently oversupplied market. May WTI traded within a 90 cent range, settling at $47.70 a barrel, down 34 cents or 0.71%, while Brent for May delivery fell 8 cents, or 0.16%, to settle at $50.56 a barrel.

With oversupply concerns increasing, calendar spreads have moved deeper into contango market conditions. This is evident in the Dec17/Dec18 WTI spread. Back in November, and prior to the OPEC agreement, this spread was trading at a $2.00 discount. Working up to and into the agreement, it traded in positive territory, peaking at $1.09. As previous doubts of adherence to the agreement grew, this spread narrowed back into negative territory, reaching a low of -$0.46, the 50% retracement of -$2.00 and $1.09, before regaining strength. With oversupply concern mounting, this spread is approaching the -$0.46 level once again. A break below this level opens up the possibility for a run at -$0.82, the 62% retracement of the above mentioned range.

April RBOB fell by 1.2 cents, or 0.8%, to $1.590 a gallon and April heating oil finished at $1.490 a gallon, down less than a cent, or 0.5%.

Fundamental NewsGenscape reported that crude oil stocks held in Cushing, Oklahoma in the week ending March 21st increased by 672,000 barrels and by 178,000 barrels from Friday, March 17th to 70.23 million barrels.

An OPEC/non-OPEC monitoring committee meeting this weekend in Kuwait may provide the first signs of whether the agreement will continue past its June expiration.  The committee chaired by Kuwait and includes Algeria and Venezuela and non-OPEC Russia and Oman.  Saudi Arabia, which holds the rotating OPEC presidency, will also attend the meeting on Sunday.  Saudi Arabia has cut its production by 140,000 bpd below its requirement under the agreement to an average output in January-February of 9.92 million bpd.  

Meanwhile, Saudi Arabia and Russia are heading to OPEC's committee meeting this weekend, with Russia continuing its slow pace to implement its full 300,000 bpd production cut.  Saudi Arabia has publically prompted Russia to speed up and implement its full production cut by the end of the month, but Russia's Energy Minister, Alexander Novak, reiterated that it would not reach its target before April.  An analyst stated that confidence in the OPEC/non-OPEC deal is the most important tool to protect oil prices and Saudi Arabia is not expected to openly criticize Russia's compliance as it is not in their interest to scare the market. 

Industry sources stated that Saudi Arabia expects its crude oil supply to remain stable at around 10 million bpd in the next few months, fully in line with the country's OPEC quota.  Saudi Arabia has stressed the importance of focusing on its supply rather than production as supply includes crude delivered to the market, domestically and for export, from the wellhead and from storage. 

Venezuelans have been lining up for scarce gasoline across the country due to increasing problems in the country.  Venezuela has struggled with intermittent gasoline shortages in recent months, especially in the central coastal region.  Long lines were reported in the capital, Caracas and the industrial city of Puerto Ordaz.  In the eastern city of Puerto Ordaz, the problem has been increasing this week and National Guard soldiers were trying to maintain order at operational service stations.  Union leader, Ivan Freites, said Venezuelan refineries, which have been at about half capacity for months amid outages, only had oil inventories for about two days compared with a standard of 15 days.   

According to Politico, the US State Department will approve by Monday the permit needed to proceed with construction of the Canada-to-US Keystone XL oil pipeline. 

Early Market Call - as of 9:00 AM EDT

WTI - May $47.90, up 20 cents

RBOB - Apr $1.5999, up 1 cent

HO - Apr $1.4980, up 81 points 

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Natural Gas

Wednesday, March 22nd, saw the front-month NYMEX Natural Gas Futures Contracts open at $3.062, three cents below Tuesday’s closing price of $3.093.  Choppy trading ensued throughout the morning as prices rose to an intraday high of $3.075 near 10:30AM and traveled lower to cross midday at $3.037.  With bearish weather outweighing expectations for an above average storage withdrawal due out this morning, April slipped downward to close lower on Wednesday at $3.011.

The EIA Natural Gas Storage Report is due out at 10:30AM today.  The report is expected to show a 156 BCF withdrawal from storage for the week ended March 17th.  This compares to a 15 BCF injection at this time last year and a five-year average withdrawal amount of 21 BCF.

This morning in Globex, WTI Crude was up 15 cents; Natural Gas was up three cents; Heating Oil was up one cent; and, Gasoline was down one cent.  Additionally, cash prices were lower in New York and New England.

Natural Gas Glossary

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