Daily Energy Market Update March 31,202

Liquidity’s Daily Market Overview

Crude oil is up now, having traded either side of unchanged overnight. The energy markets are trying to process different news items. President Trump seems to be taking a less confrontational tone which saw prices fall overnight, while prices have rebounded as actual events in the Mideast signal the war still rages on.

President Trump told aides he is willing to end the military campaign against Iran even if the Strait of Hormuz remains largely closed, leaving its reopening for a later date, The Wall Street Journal reported on ​Monday, citing administration officials. President Trump has supposedly "decided that the U.S. would wind down operations against Iran after achieving its main goals of hobbling Iran’s navy and missile capabilities. Washington will then pressure Tehran diplomatically to reopen the Strait, and may even press European and Gulf allies to take point of the reopening, the WSJ said. "  Today, President Trump pushed other nations to launch their own operation to wrest control of the Strait of Hormuz from Iran. He tweeted: "Go get your own oil!" (WSJ) Today, President Trump told CBS that not much more has to happen to declare victory. (Bloomberg) White House Press Secretary Leavitt also dropped reopening the Strait of Hormuz as an explicit war goal in recent press remarks. (Market News)

But, today Iran allegedly attacked a fully loaded Kuwaiti crude oil tanker off a Dubai port in the UAE. There has been no independent confirmation of responsibility for the attack. The tanker may not have been the intended target. Iran’s Revolutionary Guards said they had targeted a container ship that was anchored next to the tanker in the Gulf over its ties with Israel.  (Reuters/WSJ) Also today, Bloomberg is reporting that Israel and the US launched an airstrike against Iran's Qeshm island in the Strait of Hormuz.

The European Union faces no immediate supply shortages, but there is tightening in diesel and jet fuel markets and EU energy ministers will hold talks on Tuesday on how to coordinate their response to the disruption, an EU briefing document showed. (Reuters)

Insurance costs for Red Sea routes are climbing, and shipowners are already pulling back from sending their cargoes through the strait. If the Bab el-Mandeb Strait were to be choked off, the global market would lose another 7 MMBPD of supply, adding to a loss already around 15 MMBPD, squeezing a market already under severe stress. (Yahoo Finance) The Yemen-based Houthi rebels were told by Iran to prepare to reinvigorate their attacks on ships transiting the Red Sea if the US were to escalate its war in Iran, as per a Bloomberg source. The Houthis said on Saturday March 28 that they would continue military operations until the US and its allies stopped attacks but did not specify whether they would renew attacks on ships transiting the Red Sea as they had during the war in Gaza.

From over 100 vessels per day before the conflict, daily traffic through the Strait of Hormuz now totals fewer than five ships, according to data from the International Monetary Fund. (NBC News)

Bloomberg reporting Monday said:" Tankers that were carrying diesel toward Europe have changed course at sea. Four tankers recently loaded diesel-type fuel in the US and started to cross the Atlantic, according to Vortexa and ship-tracking data compiled by Bloomberg News. But, the ships have all made sharp turns: one of the 4 ships is now signaling Lome in the West African nation of Togo as its destination, while the other three vessels are heading southeast. Combined, they’re carrying about 1.2 MMBBL of diesel-type fuel, Vortexa data show. “Over the last week and a half, the diesel barrels coming out of India have all headed towards Southeast Asia,” a Vortexa analyst said. Some of India's diesel exports normally head to the EU & UK. While some diesel cargoes from the US have diverted away from Europe, many are currently en route, Vortexa data show.

Today is the last trading day for the April RB and April ULSD, as well as the May Brent futures. News wires are touting the fact that the Brent futures are set to see the largest monthly increase ever, exceeding that seen during the Kuwait war in 1990. The jump in Brent prices is set to surpass a 46% monthly gain recorded in late 1990 during the Gulf war, according to FactSet. The spot Brent futures price is set to rise 58 % on the month, while WTI is seen rising by about 54 % for the spot futures, which is the largest increase since May of 2020. On Monday, though, May Brent rose by only 21 cents  on the day on settlement basis due to position squaring ahead of the contract's expiration today, as per WSJ commentary.

The energy markets will be closed Friday in observance of Good Friday. On Sunday April 5, 8 key members of OPEC + are set to meet. The 206 MBPD increase agreed on March 1 looks insufficient. For Saudi Arabia, at $108 Brent against an $80 breakeven, Riyadh runs a massive surplus — reducing incentive to flood markets and kill the price. The countries with the most available spare capacity — Saudi Arabia at approximately 2.5 MMBPD and the UAE at approximately 1.4 MMBPD — are themselves Gulf producers whose export routes are constrained by the Hormuz situation. What are OPEC+'s options: (1) OPEC pauses the unwinding sequence and holds output at current pledged levels. This is the path of least resistance and arguably the most Saudi-rational choice (2) OPEC announces a production increase in the 300 to 500 MBPD range — larger than the March installment but well below what consuming nations are demanding. This is the political compromise that manages alliance relationships without meaningfully affecting prices. Markets would likely price this as neutral-to-slightly-bearish for crude. (3) Under intense pressure from Washington, OPEC announces an emergency production increase of 1 MMBPD or more, activating Saudi and UAE spare capacity. This would be the most bearish near-term outcome for crude. But, this possible alternative seems in practicality to be very hard to achieve given current shipping disruptions. The Trump administration has communicated its expectations directly: the White House wants at least 1 MMBPD of additional OPEC production to relieve US gas prices. (Middle East Insider)

The national average gasoline price at the pump in the US has climbed over $4 today for the first time since 2022. The average gasoline price is up 2.8 cents from yesterday, climbing to $4.018. That is up $1.036 from February 27's price. Today's average diesel price at the pump in the US is up 3.8 cents from yesterday at $5.454. The price is now up $1.697 from February 27. The AAA shows a record price for diesel at the pump of $5.816 from June 19,2022.

Energy Market Technicals

WTI spot futures settled Monday over $100 for the first time since July 2022. Overnight, May RB rose to a fresh contract high--with the US retail gasoline price having risen over $4. Momentum is positive for the energies. 

Spot WTI futures have resistance at 105.22 and then at the overnight high at 106.86. Support lies at 99.43-99.44 and then at 96.86-96.96.

Natural Gas Market Overview

Natural Gas --NG is up 8.0 cents at $2.967
NG futures have turned positive as the latest weather run saw HDD demand rise quite a bit.

In the latest 11 to 14 day Lower 48 states weather run, the HDD count added some heating demand, practically doubling from 19.93 HDD to 41.01 HDD, thus putting it now in line with the ten-year average, as per Market News reporting. Yesterday, Celsius Energy said that the forecast was about as bearish as it can get for the first two weeks of the injection season with forecast GWDDs for March 30-April 12 at just 151 GWDDs, by far the fewest for the period in the last 5 years. The prior 5 year average GWDD for the period is 212.  Reflecting the weak demand, NGI’s Spot Gas National Average price fell Monday by  21.5 cents to $1.645/MMBtu.

NGI says that the natural gas power burn has risen to be in line with year to date levels versus a year ago as low prices are "giving the fuel a competitive boost even as the mildest March weather in 14 years suppressed broader demand."

As we come up upon the beginning of injection season, the NG market will now shift its focus to the end of season / end October gas storage levels. Celsius Energy writes: " My end-of-season storage maximum projection currently stands at 3.730 TCF for November 13, 72 BCF bullish versus the 5 year average & the third lowest season-ending maximum in the last 5 years. It would represent a 125 BCF improvement from the current surplus.  The Desk sees the end of October 2026 storage level being at 3.907 TCF. This month's STEO by the EIA forecasted EOS October 2026 to be at 3.971 TCF. 

This week's EIA gas storage data is seen as a build of 30 to 38 BCF, as per early estimates. That compares to last year's build of 30 BCF and the 5 year average which is a draw of 4 BCF. NGI points out that HDD demand fell during the reporting period thus putting a damper on gas-fired power production.

LNG feedgas demand figures are expected to rise significantly in the weeks ahead, following news that Golden Pass has achieved first LNG. Kpler data suggest an LNG vessel is estimated to arrive at Golden Pass on or near April 28.  (NGI)

The EU gas storage was at 28.14% full as of March 28 (versus the 5-year average of 40.9%), as per Gas Infrastructure Europe data. Analysts at ING warn that prolonged LNG supply disruptions could slow the pace of injections into European storage and intensify competition for spot LNG cargoes, particularly at a time when the ability to increase or redirect global supply is limited. 

China’s LNG imports are on track to fall below 4 million metric tons in March for a second straight month, which would mark the weakest monthly intake in roughly eight years, according to Vortexa. The main reason is price. Asian spot LNG has surged above $20/MMBtu since the US-Iran conflict began, while China’s domestic trucked LNG prices have risen far less to around $15/MMBtu. China is seen entering the shoulder season with comfortable supply from domestic production and pipeline imports. They have thus re-exported spot LNG cargoes and sold them to South Korea, Thailand, Japan and the Philippines. (Market News)

Open interest data from Monday from the CME shows a rise of 14,191 contracts in NG futures, which we see as mostly new short positions. These were in the May, June, October and November contracts. Further open interest data from the LN options on the CME show new positions in the September November CSO. The minus 30 cent call was sold against buying of the minus 50 cent put at a cost of 2.5/2.6 cents. A total of 5,000 contracts traded. The September November futures spread settled Monday at minus 39.5 cents. Additionally open interest fell in the October January CSO -$1.00 and -$0.75 call options. The -$1.00 call was bought against selling of the -$0.75 call at a cost of 3.9 and 4.0 cents.

Technically, momentum has turned positive for the NG basis both the DC and May daily charts with this morning's rally. The overnight selloff tested support at $2.807 with a low of $2.803. The DC chart's lower bollinger band was also tested; that band intersects at $2.835. Below $2.80, support lies at 2.776. Resistance at 2.943 has been pierced. Above that resistance is seen at 2.981-2.986 and then at the double top from Friday/Monday at 3.057-3.060.

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Disclaimer

This article and its contents are provided for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.

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