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Futures Market News and Commentary
Apr WTI crude oil (CLJ19) on Tuesday closed down -$0.06 (-0.10%) per barrel and May Brent crude (CBJ19) closed up +$0.07 (+0.10%). Apr RBOB gasoline (RBJ19) closed up +1.03 cents per gallon (+0.55%). The energy complex settled mixed Tuesday with May Brent crude at a 4-month high. A sell-off in the dollar index to a new 2-week low Tuesday was positive for energy prices, as was the early rally in the S&P 500 and the Euro Stoxx 50 stock indexes to 5+ month highs, which shows confidence in the economic outlook and energy demand. Another bullish factor was Tuesday afternoon's data from API that showed U.S. crude stockpiles fell -2.13 million bbl last week. The energy complex still has support from Monday when Saudi Arabian Energy Minister Khalid Al-Falih said that OPEC+ members are conforming well to the crude production cuts they agreed to in January and that compliance with the cuts will easily exceed 100 percent in March. In a bearish factor, however, Russia is insisting that OPEC+ delay a decision until June on extending the 1H production cuts into 2H, suggesting that Russia is becoming reluctant to extend its production cuts. On the negative side is the consensus for Wednesday's weekly EIA crude inventories to increase by +1.75 million bbl.
Apr Nymex natural gas (NGJ19) on Tuesday closed up by +0.024 (+0.84%). Nat-gas prices rallied to a 1-1/2 month nearest-futures high Tuesday on forecasts for colder-than-normal weather this week on the U.S East coast, which may further deplete already tight U.S. nat-gas supplies supply. Accuweather has forecast the low in New York city of 32 degrees Fahrenheit (0 degrees Celsius) on March 22, 3 degrees below normal. A decline in the dollar index to a 2-week low Tuesday was another supportive factor for nat-gas prices. Further upside may be limited on the outlook for warmer weather after NOAA forecasted above-normal temperatures across most of the northern U.S. from March 25-29. An increase in U.S. nat-gas output is another negative for prices after today's data showed U.S. lower-48-state nat-gas production at 84.144 bcf, up +5.0% y/y. In addition, the April-May nat-gas futures spread remained negative today and has been negative since Jan 30. A negative spread suggests nat-gas supplies will be ample by the end of the heating season. Nat-gas prices have underlying support from tight U.S. nat-gas supply. The EIA reported last Thursday that U.S. nat-gas inventories fell by -204 bcf in the week ended Mar 8, a much larger draw than the 5-year average of -99 bcf and a record drop for this time of year. U.S. nat-gas inventories continue to shrink as nat-gas stockpiles on Mar 8 stood at a 4-3/4 year low of 1.186 tcf, down -22.6% y/y and -32.4% below the 5-year average.