Crude Climbs on a Weaker Dollar and Chinese Economic Strength

April WTI crude oil (CLJ23) this morning is up +0.94 (+1.20%), and Apr RBOB gasoline (RBJ23) is up +1.82 (+0.67%).  April Nymex natural gas (NGJ23) is up +0.099 (+3.58%).

Crude oil and gasoline prices this morning rose to 2-week highs and are moderately higher.    A weaker dollar today is supportive of energy prices.  Also, signs of economic strength in China, the world's second-largest crude consumer, is bullish for oil prices after a gauge of China's services sector expanded at the fastest pace in 6 months.   Crude prices this morning initially fell after the Wall Street Journal reported that the United Arab Emirates (UAE) was discussing quitting OPEC.  However, crude prices reversed and moved higher after the UAE said it has no plans to leave OPEC.

Apr nat-gas this morning rallied to a 5-week high.  The outlook for colder U.S. temperatures that will boost heating demand for nat-gas is lifting gas prices today.  The Commodity Weather Group said temperatures are expected to fall below normal across most of the U.S. at least through the middle of March.  Also, strength in U.S. nat-gas exports will reduce U.S. gas supplies and is bullish for prices, after BNEF data showed gas flows to U.S. LNG export terminals today rose to a record 14.1 bcf, up +14% w/w as the Freeport terminal reopens.

China's economic news today was better than expected and bullish for energy demand and crude prices.  China's Feb Caixin services PMI rose +2.1 to 55.0, stronger than expectations of 54.5 and the fastest pace of expansion in 6 months.

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 Moderately Lower on Expanding U.S. Nat-Gas Stockpiles
• Expectations of Stronger Chinese Energy Demand Lifts Crude Prices
• Nat-Gas Prices Push Higher on Forecasts for Colder U.S. Weather
• Crude Slightly Lower on a Mixed EIA Inventory Report