Upping The Ante on Venezuela

CRUDE OIL 

May Crude Oil is higher this morning in the wake of President Trump’s announcement yesterday that any country that buys oil or gas from Venezuela will pay a 25% tariff on any trades made with the US, effective April 2. This could tighten global supply further, especially when the US sanctions against Iranian Oil are taken into account. China is the largest buyer of Venezuelan oil. US and Russian negotiators held talks in Saudi Arabia on Monday to discuss a Black Sea maritime cease fire deal, and Ukrainian and US delegations are scheduled to meet today. A peaceful resolution to the Ukraine war could reopen Russian supply to the world market.  Russia’s central bank recently warned that the US and OPEC have the capacity to flood the oil market and cayuse a repeat of the prolonged price collapse of the 1980s. Sources told Reuters yesterday that OPEC+ will likely stick with its plan to raise oil output by roughly 135,000 barrels per day in May after a 138,000 bpd increase in April. The group is wants to lift restrictions for those producers who have been observing their official quota levels while at the same time lowering output for those who have been overproducing. Iraq is being called on to make most of the output cuts, with some also by Kazakhstan and Russia.

NATURAL GAS

The 6-10-day US weather forecast is looking a little less bearish today than yesterday, with below normal temperatures a down into Wisconsin and most of Michigan and Minnesota as well at upstate New York. Much of the upper Midwest and Great Lakes look normal. However the 8-14-day shows above normal temperatures dominating the central part of the US. China’s first-quarter LNG imports are expected to show a decline of 22% from year ago levels to 15.8 million metric tons, their lowest level for that period since 2020, due to warmer weather this winter, weaker industrial demand, higher domestic production, and increased pipeline imports. Shell estimates global demand for liquefied natural gas to rise by around 60% by 2040, driven largely by economic growth in Asia, the impact of artificial intelligence, and efforts to cut emissions in heavy industries and transportation. For the EIA storage report this week, the early Reuters poll of analysts shows an average expectation for natural gas storage to be +6 to +38 bcf last week. The five-year average change for the week is -27 bcf.

PRODUCT MARKETS

Trade expectations call for both US gasoline and distillate stocks to show declines of 2.2  million barrels in this week’s supply reports. Like Crude Oil, May RBOB ran into resistance at the 100-day moving average overnight at 2.2245, and a move through there would leave additional resistance at 2.2368 and 2.2580.

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