Weekly Natural Gas Report 6-4
Summary of the weekly U.S. EIA Natural Gas Storage Report – NG storage for the U.S. and by region.
Energy Market Intelligence Team - USA
- Energy
Crude Oil Physical Markets Remain Elevated
By: Tom Pawlicki, Senior Specialist, Market Intelligence
Futures markets are showing an easing in the oil market’s supply tightness, but some physical markets remain tight and indicate demand for near-term supply. North Sea spot prices probed record highs this morning on the announcement of the US blockade of the Strait of Hormuz.
Early last week, there was a surge in the backwardation in WTI futures in front of the May contract’s expiration, as physical buyers scrambled for supply. The same happened in Brent crude at the end of March as that market’s May contract expired. Backwardations in both markets have pulled back since then and are both near $6/bbl compared to $14+/bbl 1-2 weeks ago.
By late last week, there were indications that the oil markets anticipated the two-week peace deal with Iran to become permanent. Oil tanker rates began to ease and the price of Oman crude oil remained firmly below its mid-March peak near $150/bbl. Brent and WTI oil futures remained near the lower ends of their two week trading ranges.
Tightness remains in the spot market, however, with spot Brent, Oseberg and Forties reaching or approaching record highs today. Reuters reported today that Forties traded at a record high above $150/bbl, although it published a closing price of $123.50/bbl. Spot prices for Brent and Oseberg remain near their highs for the current move.
The trade in oil has been very two-sided, and has been pushed around by changing rhetoric from both President Trump and Iran. It showed that again today, when WTI advanced as much as $9.05/bbl at the overnight high and fell back throughout the day to trade with a gain of only ~$2.00/bbl in the afternoon.
President Trump this afternoon said that Iran wants a deal and said last week that they already conceded their nuclear program, although they declined to make a deal over the weekend in part because they said they want to keep their nuclear program. For its part, Iran said that it encountered maximalism, shifting goalposts, and blockade from the US at the negotiations, even though US demands are unchanged. It also said that US actions to blockade the Strait of Hormuz constitute an act of piracy, even though Iran did it themselves for the last six weeks. Iran said late Sunday that if its port facilities are targeted, it will attack ally ports in the region.
There continues to be talk from both sides that some kind of “deal” is right around the corner, but no deal ever comes and the two sides appear to remain far apart. But President Trump continues to say that non-public negotiations are much different in tone than Iran’s public statements. Adding up the on-again/off-again prospects for a peace deal to the increase in violent rhetoric from Iran does not suggest that a deal is close and that oil prices should remain firm. However, negotiations can change at any moment, just as they have in the past six weeks.
- Energy
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