Expectations of Stronger Chinese Energy Demand Lifts Crude Prices

April WTI crude oil (CLJ23) this morning is up +0.75 (+0.97%), and Apr RBOB gasoline (RBJ23) is up +2.52 (+0.94%).  April Nymex natural gas (NGJ23) is down -0.044 (-1.57%).

Crude oil and gasoline prices this morning are moderately higher, with crude posting a 1-1/2 week high and gasoline posting a 2-week high.  Signs of economic strength in China, the world's second-largest crude consumer, is bullish for oil prices.  Strength in the dollar (DXY00) today is limiting the upside in crude prices.

April nat-gas this morning is moderately lower as a warmer-than-normal winter has allowed U.S. nat-gas stockpiles to build.  Today's weekly EIA inventory report showed that nat-gas supplies fell -81 bcf, which was a bigger draw than expectations of -75 bcf but was well below the 5-year average for this time of year of -134 bcf.  That has allowed U.S. nat-gas inventories to build as they are now +19.3% above their 5-year average as of February 24, the most in 2-3/4 years.  Losses in nat-gas were limited after the Commodity Weather Group said a cold front sweeping across the western half of the U.S. is seen expanding into the bulk of the Lower-48 states through mid-March, boosting heating demand for nat-gas.

Signs of economic strength in China are bullish for energy demand and crude prices.  China's Feb manufacturing PMI rose +2.5 to 52.6, the fastest pace of expansion in more than ten years.  Also, China Feb home sales by the 100 biggest real estate developers rose +14.9% y/y, the first year-on-year increase since June 2021.  

Strength in the crude crack spread is supportive of crude prices.  The crack spread today climbed to a 1-month high, encouraging refiners to boost their crude purchases and refine it into gasoline and distillates.

Indian buyers of Russian oil are struggling to obtain the crude as onerous demands from financiers wary of breaching Western sanctions are making it hard for Indian buyers to secure financing for their purchases of Russian crude.  The inability to fund the purchases of Russian crude may force Indian buyers elsewhere to obtain crude supplies, which is bullish for oil prices.  

Rising crude demand in India, the world's third-largest crude consumer, is bullish for prices.  India's oil ministry predicts India's oil-products consumption will climb by +4.9% y/y to a record 233.8 MT in the 12 months from April.  

In a bullish factor, Vortexa last Monday reported that the amount of crude stored on tankers that have been stationary for at least a week fell -8.4% w/w to 71.27 million bbl in the week ended February 17.

On February 1, the OPEC+ Joint Ministerial Monitoring Committee recommended keeping crude production levels steady as the oil market awaits clarity on demand in China and crude supplies from Russia.  Goldman Sachs predicts that OPEC+ will only start to reverse its supply cuts, currently at about 2 million bpd, in the second half of this year when accelerating demand will tighten the market.  OPEC crude production in February rose by +120,000 bpd to 29.24 million bpd.

Wednesday's EIA report showed that (1) U.S. crude oil inventories as of February 24 were +9.7% above the seasonal 5-year average, (2) gasoline inventories were -5.6% below the seasonal 5-year average, and (3) distillate inventories were -11.1% below the 5-year seasonal average.  U.S. crude oil production in the week ended February 24 was unchanged w/w at a 2-3/4 year high of 12.3 million bpd, which is only 0.8 million bpd (-6.1%) below the Feb-2020 record-high of 13.1 million bpd.

Baker Hughes reported last Friday that active U.S. oil rigs in the week ended February 24 fell by -7 rigs to 600 rigs, moderately below the 2-1/2 year high of 627 rigs posted on December 2.  U.S. active oil rigs have more than tripled from the 17-year low of 172 rigs seen in Aug 2020, signaling an increase in U.S. crude oil production capacity.

• Nat-Gas Prices Push Higher on Forecasts for Colder U.S. Weather
• Crude Slightly Lower on a Mixed EIA Inventory Report
• Nat-Gas Prices Firm on Below-Normal U.S. Temps
• Crude Rallies as Sanctions on Russian Crude Tightens Global Oil Supplies