Energy Report: Clogged Artery

Overall, the tally showed crude oil inventories increased by 1.9 million barrels from the Clogged Artery the previous week. At 502.7 million barrels, U.S. crude oil inventories are about 6% above the five-year average for this time of year. Total motor gasoline inventories increased by 0.2 million barrels last week and are about 3% below the five years, the average for this time of year. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 3.8 million. barrels last week and are about 1% above the five-year average for this time of year.

Today we will also get the EIA natural gas report. The report may determine whether we have hit a bottom in the market. Andrew Weissman of EBW Analytics says that natural gas futures have managed to stave off further declines after closing just above $2.48/MMBtu twice last week. But continued weak, weather-driven demand and narrowing storage deficits may yet prove overpowering.

Much milder-than-normal weather forecasts may weigh on natural gas into mid-April, erasing most of the storage deficit vs. the five-year average. Today’s Weekly Storage Report carries increased heft following three straight bearish reports and concerns over extended industrial demand outages. A supportive number could lend confidence in stronger fundamental footing for natural gas.

By late spring, bullish catalysts await natural gas: planned local distribution company injections, elevated LNG feedgas demand, weak natural gas production, higher chances for bullish weather, stronger industrial demand, seasonally greater power burn, and a likely economic boom. Futures will likely establish a firm bottom in the next 30-45 days and begin moving higher by early summer.

Reuters reports that U.S. utilities likely pulled a smaller-than-usual 25 billion cubic feet (bcf) of natural gas from storage last week even though temperatures were in line with normal, a Reuters poll showed on Wednesday. That will likely be the last withdrawal of the 2020-2021 winter heating season and compares with a decline in inventories of 26 bcf during the same week a year ago and a five-year (2016-2020) average withdrawal of 51 bcf. Utilities withdrew 11 bcf of gas from storage in the prior week ended March 12. If analysts are on target, the draw during the week ended March 19 would take stockpiles down to 1.757 trillion cubic feet (tcf), 3.7% lower than the five-year average and 12.5% below the same week a year ago.

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