Crude Prices Plummet on Global Financial Woes

April WTI crude oil (CLJ23) this morning is down -4.10 (-5.75%), and Apr RBOB gasoline (RBJ23) is down -12.87 (-5.04%).  April Nymex natural gas (NGJ23) is down -0.136 (-5.29%).

Crude oil and gasoline prices this morning are sharply lower, with crude falling to a 14-3/4 month low and gasoline dropping to a 2-week low.  Crude prices are selling off on concern about global financial conditions after a plunge in Credit Suisse Group AG today to a record low sparked a sharp decline in U.S. and European equity markets.  Also, today's monthly report from the IEA shows ample global oil supplies, which is undercutting crude prices.  In addition, a sharp rally in the dollar today (DXY00) is bearish for energy prices.  Crude prices maintained heavy losses despite today's mostly supportive weekly EIA report.

Apr nat-gas this morning is sharply lower as concerns about the health of the global financial sector have sparked a sell-off in risk assets, including nat-gas.  Also, the market's fundamentals remain weak with burgeoning U.S. nat-gas supplies as U.S. nat-gas inventories are +21.5% above their 5-year average, the most in 6-1/2 years.

A bearish factor for crude was today's monthly report from the International Energy Agency (IEA) that said global crude supplies would "comfortably" exceed demand in the first half of this year.  The IEA reported that global oil inventories surged by 52.9 million bbl in Jan to 7.8 billion bbl, the highest in 1-1/2 years.

A negative factor for crude was JPMorgan Chase's projection Monday that Q1 China fuel demand would be less than forecast due to lower-than-expected international travel from China.  China's international travel is only 23% of 2019's average since reopening in early Jan.

In a bullish factor, Vortexa Monday reported that the amount of crude stored on tankers that have been stationary for at least a week fell -9% w/w to 73.62 million bbl in the week ended March 10.

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 Russian oil purchases.  The difficulty of funding the Russian oil purchases 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.  

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.

Today's weekly EIA inventory report was mostly supportive of crude and its products.  EIA gasoline supplies fell -2.06 million bbl, a sharper draw than expectations of -1.62 million bbl.  Also, EIA distillate stockpiles fell -2.5 million bbl, a larger draw than expectations of -1.4 million bbl.  In addition, crude supplies at Cushing, the delivery point for WTI crude futures, fell -1.92 million bbl.  Conversely, EIA crude inventories rose +1.55 million bbl, close to expectations of +1.50 million bbl.

Today's EIA report showed that (1) U.S. crude oil inventories as of March 10 were +6.9% above the seasonal 5-year average, (2) gasoline inventories were -2.5% below the seasonal 5-year average, and (3) distillate inventories were -7.8% below the 5-year seasonal average.  U.S. crude oil production in the week ended March 10 was unchanged at 12.2 million bpd, which is only 0.9 million bpd (-6.9%) 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 March 10 fell by -2 rigs to an 8-3/4 month low of 590 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.

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