April 2, 2024
Conventional energy commodities have mixed data at the inventory level with geopolitical risk pushing them up.
Crude Oil
WTI grew despite a buildup in stocks
- WTI futures rose +18.2% during Q1 2024, despite a strong buildup in inventory.
- WTI crude futures settled at $83.2 per barrel on Thursday, advancing for the third consecutive month amid ongoing efforts by the OPEC+ alliance to curb supply, as well as persistent geopolitical risks in Eastern Europe and the Middle East.
- In early March, OPEC+ agreed to extend voluntary production cuts through the end of Q2 2024 and is expected to maintain current output policies when it meets next week.
- Oil prices were also boosted recently by Ukrainian drone attacks on Russian refineries which affected more than 10% of the country’s oil processing capacity.
- On a YTD basis stocks strengthened by 17.1 million barrels, but oil traders remain bullish.
Gasoline
Gasoline prices gradually advance
- NYMEX gasoline futures soared more than +31% on Q1 2024, as a historically high level of inventory fell abruptly.
- During the last week of March, gasoline prices remained within $2.74- $2.76 range, amid further evidence of muted demand and eased concerns of low supply.
- The latest report from the EIA showed that gasoline products supplied, a close proxy for demand in US markets, extended last week’s sharp drop by 94 thousand barrels on the period ending March 22nd.
- Additionally, gasoline stockpiles in the US jumped by 1.3 million barrels in the week, challenging market expectations of a 1.65-million-barrel draw and halting seven consecutive weeks of declines.
Natural Gas
LNG storage is strong, sending futures lower
- Natural gas prices plunged -31.3% as Q1 2024 ended.
- US natural gas prices closed March slightly above $1.76/MMBtu mark due to a larger-than-expected storage draw reported by the EIA and increased demand forecasts for the next two weeks.
- Utilities withdrew 36 bcf of gas from storage, exceeding the 28 bcf draw expected by the market.
- Futures prices are expected to remain under pressure due to forecasts of mild weather, ample gas in storage, and reduced gas flow to LNG export plants.
- These factors may lead to record-high US gas consumption in 2024 and the first production cut since 2020.
- Energy firms have already reduced output by about 3% in response, delaying well completions and scaling back drilling activities