March 4, 2024
WTI and gasoline futures increased party due to lower OPEC+ supply and firm demand. LNG prices stayed behind as a result of the steady storage level.
Crude Oil
WTI hiked despite consecutive inventory buildup amid OPEC+ decision
- WTI crude futures rose to around $80 per barrel, the highest in four months, driven by speculation that OPEC+ will extend supply cuts and lingering tensions in the Middle East.
- Anonymous sources within OPEC revealed that certain OPEC members and allies, spearheaded by Russia, have reached an agreement to prolong voluntary oil output reductions from the first quarter into the second quarter of 2024.
- These cuts, initially totaling approximately 2.2 million barrels per day (bpd), were endorsed by OPEC+ in November, with Saudi Arabia leading by example by extending its own voluntary reduction.
- Uncertainty surrounding ceasefire talks between Israel and Hamas, as well as ongoing Houthi attacks on Red Sea shipping also added a risk premium to oil prices.
- Meanwhile, the most recent EIA report showed a larger-than-expected increase in US crude stocks, climbing by 4.199 million barrels last week due to a slowdown in refinery processing.
- For the week, oil prices are up more than 5%, recovering from a 2.5% loss in the previous period.
Gasoline
Gasoline soared, driven by strong demand
- Gasoline futures climbed above $2.6 per gallon in early March, marking a more than 5-month high, tracking the surge in oil benchmarks and amid recent evidence of low supply and steady demand.
- Speculation regarding OPEC+ extending supply cuts and ongoing tensions in the Middle East contributed to a constrained supply outlook.
- Additionally, in the week ending February 23rd, the latest EIA report revealed a notable increase in gasoline demand, measured by product supplied, with a rise of 267 thousand barrels to reach 8.467 million barrels.
- Furthermore, this corresponds with the fourth consecutive drawdown in stocks, totaling a significant 2.83 million barrels decline during the period, exceeding expectations for a decrease of 1.46 million barrels.
- In a related development, the Russian government implemented a six-month ban on gasoline exports starting March 1st, aiming to address the nation’s ongoing refinery capacity challenges during a seasonal increase in demand.
Natural Gas
LNG stays below $1.9 mark as storage is at multiyear high
- US natural gas futures strengthened in the last days of February but edged down to below $1.9/MMBtu in early March, following a more than 12% decrease in February due to an oversupply caused by a mild winter and record output levels.
- According to the latest EIA report, utilities pulled 96 bcf of gas from storage, exceeding market expectations of an 88 bcf draw.
- Storage levels are currently 27% higher than the 5-year average.
- Additionally, the closure of a liquefaction unit at Freeport LNG’s export facility in Texas is expected to keep more gas within US.
- To combat the surplus, producers have reduced production by 30%, with other companies also scaling back drilling and production efforts.