Fear Reaches New Level

April 15, 2024

Energy commodities endure significant pressure from geopolitical intensification along with changes in fundamentals.

Crude Oil

Speculators see upswing opportunity, placing their bets

  • WTI crude futures rose toward $86 per barrel during last week’s session, closing in on the highest level since October 20th as the prospect of a wider conflict in the Middle East continued to stoke fears of further supply disruptions.
  • WTI soared +3% over the last two weeks, while analysts anticipate the upswing to remain strong in the short term.
  • On the demand side, strong US inflation data dampened hopes of early interest rate cuts from the Federal Reserve, potentially hurting the outlook for energy demand.
  • Examining the latest EIA data, the current cumulative crude oil production is 7.2% stronger than the same period last year. Inventory increase (when comparing 2024 with 2023) is lower by 6 million bpd (24.9m bpd vs 30.9 bpd).


Gasoline demand is growing

  • Gasoline futures in the US rose above $2.80, tracking other oil-derived fuels to their highest in one year, as concerns of escalated warfare in the Middle East rose.
  • Implied demand minus product supplied as calculated from EIA data shows an increased demand for gasoline (12.5m bpd vs 11.8 bpd, or +5.4% on y/y basis), compared to 2024 (using YTD data) with the same period the previous year.
  • The latest EIA report showed that gasoline stocks rose by over 700 thousand barrels on the week ending April 5th, surprising markets that expected a 1.32 million barrel draw, and in line with a sharper-than-expected build in crude oil stocks.
  • Also limiting the increase, the total product supplied for motor fuel in the period fell by 624 thousand barrels to 8,612 million, pointing to a drop in US demand.

Natural Gas

LNG seems undervalued compared to crude oil

  • US natural gas futures fell to $1.8/MMBtu, after touching one-month highs early in the week, amid forecasts for lower demand and a bigger-than-expected rise in natural gas inventories in the US.
  • The equivalent crude-to-LNG ratio remains at historical high levels, supporting unilaterally by crude oil price appreciation.
  • EIA data showed an inventory build of 24 billion cubic feet last week, almost double the market forecasts.
  • It’s noteworthy to be mentioned that during Q1 2024 the LNG storage decreased by 1,193 Bcf while the same period one year before the storage was strengthened by 1,855 Bcf.
  • Also, the working natural gas inventories ended the winter heating season (that ended on March 31st) at 2,290 billion cubic feet, 39% higher than the previous five-year average, due to mild weather, low natural gas consumption, and high natural gas production.
  • Meanwhile, the amount of gas flowing to the Freeport LNG export facility in Texas is expected to fall to near zero, after one of the plant’s three trains tripped.