Daily Energy Market Update 3-04-2025

Crude is down 56 cents????? RB is down 0.24 cents?????? ULSD is up 1.86 cents

Overview

Crude oil prices have fallen to multi month lows as OPEC+ has signaled their intention to raise production,? U S tariffs on Mexico, Canada and China have begun, and the U.S. suspended aid to Ukraine.

OPEC+ decided on Monday to proceed with a planned April oil output increase of 138 MBPD, the group's first increase since 2022. This is the first step in the gradual unwinding of 2.2 MMBPD of cuts. (Reuters)

Platts has an article that suggests that OPEC+ will be able to raise output due to an "expected drop in Iranian output". " While analysts see a full suspension of Iranian exports as unlikely, they are revising down expectations for Iranian production in 2025.", Platts wrote. Iran produced 3.2 MMBPD of crude in January, according to S&P Global Commodity Insights, up from 2.52 MMBPD in January 2022. Forecasts for a sharp reduction in output contrast with Iran’s plans. It is aiming to raise output by 250 MBPD compared to October 2024 levels by March 20, when the current Iranian year ends. So far it has only confirmed growth of 70 MBPD. During Trump’s first term in office Iranian oil exports plummeted from 2.3 MMBPD in 2018 to 1.1 MMBPD in 2019 and 585,900 BPD in 2020.

President Trump's new 25% tariffs on imports from Mexico and Canada took effect on Tuesday, along with a doubling of duties on Chinese goods to 20%, launching new trade conflicts with the top three U.S. trading partners. China responded immediately after the deadline, announcing additional tariffs of 10%-15% on certain U.S. imports from March 10 and a series of new export restrictions for designated U.S. entities. Canadian Prime Minister Justin Trudeau said Ottawa would respond with immediate 25% tariffs on C$30 billion ($20.7 billion) worth of U.S. imports, and another C$125 billion ($86.2 billion) if Trump's tariffs were still in place in 21 days.? (Reuters)?

U.S. stock futures pointed to further declines on Wall Street after the S&P 500’s biggest drop this year as worries over global trade tensions weighed on markets. (Bloomberg)

President Trump paused military aid to Kyiv in the most dramatic step yet in his pivot towards closer ties with Russia. Some see this as a precursor to the U.S. potentially lifting sanctions on Russian oil. Ukraine's Prime Minister said Kyiv still had the means to supply its frontline forces. Military experts say it could take time for the impact of missing U.S. aid to be felt on the battlefield.? (Reuters/Platts)

Data released Monday saw the U.S. ISM for February fall from January and miss the forecast. The February ISM came in at 50.3, which was down from January's reading of 50.9. FX Street says that the forecast was for a February reading of 50.5. This data caused some weakness in mid-morning Monday in oil prices.

Saudi Arabia is seen lowering the OSP for their flagship A-Light crude by 20 to 65 cents for April loadings to Asia. This comes after they had a March premium that was the highest in more than 1 year. The Medium crude grade OSP is seen falling by 65 cents and the Heavy crude OSP is seen possibly dropping by 10 to 65 cents. (Reuters)

Although the U.S. is urging Iraq to resume exports from the semi-autonomous Kurdistan region, eight international oil firms operating there said on Friday they would not restart shipments through Turkey’s port of Ceyhan due to a lack of clarity on commercial agreements and guarantees of payment for past and future exports. (Reuters)

On the supply front in the immediate, we have seen these stories today from Platts. Loadings of Norway's Johan Sverdrup crude are set to average 760,000 b/d in April, up from 716,129 b/d in March, according to a copy of the loading program seen by Platts March 3. In April, total volumes will rise by 600,000 barrels from March. Iraq's total federal crude oil exports in February rose by 64 MBPD to 3.398 MMBPD, exceeding the oil ministry's March 2024 pledge to limit exports to 3.3 MMBPD, according to SOMO data seen by Platts March 3.

WTI open interest on the CME rose considerably yesterday. The increase of 24,239 contracts is likely new shorts added in the May thru July and September and October contracts.?

Technicals

The crude oils and distillates are testing their lower bollinger bands in today's selloff. Momentum is negative for the WTI on the DC chart. ULSD's momentum is getting oversold on the DC chart.

ULSD is having an inside day today versus yesterday's trading range. ULSD has a mean reversion setup from Monday's settlement below the DC chart's lower bollinger band. That band lies today at 2.2708.? Support lies at Monday's low of 2.2479 and then at 2.2275-2.2285. Resistance comes in at the 2.2966 area and then at the 2.3220 area.

April WTI sees support at 66.94-66.98 and then at the low of 66.61 seen in November. Resistance comes in at 69.11-69.16. The lower DC chart's bollinger band intersects at 67.74.

RB spot futures see support at 2.1673-2.1682 and then at 2.1463-2.1479. Resistance lies at 2.2075-2.2086 and then at 2.2268-2.2283. The DC chart's upper bollinger band that was broken yesterday as April became spot lies today at 2.1984.

Natural Gas--NG is up 18.6 cents

NG spot futures are higher now, after overnight giving back some of yesterday's strong rally. Market News touted the "softening? in LNG feedgas flows this week and a mixed weather picture" for the overnight slide. The imposition of tariffs and Canada's threat to cut off electricity to the U.S. and the possible loss of gas imports from Canada to the U.S. may be behind today's rally. NGI cites "geopolitical headlines" and "financial flows" as being supportive.?

NG HH next day gas is?quoted 4.05/4.30 with no trade seen as yet --versus NG April futures printing 4.330. The HH cash quote is up 30 cents or more from yesterday's early morning price.?

NG rallied Monday on a cooler forecast for this coming weekend into the start of next week. (WSJ)? Morning computer models trended colder, especially for the 2nd & 3rd weeks of March, adding about 25 GWDDs to the 14-day outlook, as per Celsius Energy reporting. The chillier forecasts prompted some short-covering, according to NGI commentary Monday.

In 2024, on a net basis the U.S. imported 2.13 trillion cubic feet of gas from Canada, which equates to 5.835 BCF/d. (Wolf Street.com as per EIA sourced data) Additionally, North-eastern US states like Vermont, New York and Maine significantly rely on electricity sold to them by neighbouring Canadian provinces. British Columbia and Manitoba also supply energy to western and Midwestern regions of the US.

Lower 48 natural gas demand is down today on the day back to near the seasonal five year average at 82.3 BCF/d. This is down from yesterday's demand of 91.5 BCF/d. The 5 year average is seen at near 80 BCF/d as per Market News reporting yesterday.

LSEG forecast average gas demand in the Lower 48 states, including exports, will fall from 119.3 BCF/d this week to 114.7 BCF/d next week. These forecasts were up a total of 2.3 BCF/d from those seen Friday and were seen contributing to the rally in NG futures seen Monday.

The amount of gas flowing to the eight big U.S. LNG export plants has risen to an average of 15.8 BCF/d so far in March, up from a record 15.6 BCF/d in February, as per Reuters reporting seen Monday.?

LSEG said Monday that average gas output in the Lower 48 U.S. states has risen to 105.8 BCF/d so far in March, up from a record 104.7 BCF/d in February.

Natural gas storage is still on track to bottom for the season below 1600 BCF in the next 3-4 weeks, as per Celsius Energy analysis. The Desk End Of Season storage forecast is for inventories to be 1.616 TCF. This forecast was up 54 BCF from that seen a week ago. EBW analysis says " end of season inventories may end March near a manageable 1,650 BCF." Last week, the EIA wrote:? "If the rate of withdrawals from storage matched the five-year average of 5.7 BCF/d for the remainder of the withdrawal season, the total inventory would be 1,622 BCF on March 31, which is 238 BCF lower than the five-year average of 1,860 BCF for that time of year.

The call options for April and May saw very large increases in open interest on the CME from Monday's activity. Notable trades seen were the April $5.25/$5.50 call spread which traded 1.1 cents and the April $4.50/$6.00 call spread that traded at 29.6 cents. In the May calls, notable was the $4.50/$5.00/$5.50 call butterfly that traded 5.4 cents and the $4.50/$5.00 call spread that traded between 6.5 and 10.7 cents.

Technically NG has momentum on the DC chart that is turning neutral in the face of the strong rally seen the past 24 hours. Resistance may lie at prior major highs at 4.369 and 4.476 from the DC chart. Support is likely at 4.173-4.175, with the 4.173 having been seen as a double top from yesterday/today up until 1 hour ago.

Disclaimer

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