Petroleum future prices surge even though U.S. commercial petroleum stocks increased by a record-breaking 32.98 million barrels last week, the largest weekly increase ever. The market looked beyond that massive increase in supply in part because there are signs that OPEC plus Russia will enact the biggest oil production cut ever. 

Maybe it is just a crash in oil prices that brought price warring factions like Saudi Arabia and Russia back to the table. Yet, more than likely, it was intense pressure by the Trump administration and Republican lawmakers. Not only did President Trump threaten to sanction Russian and Saudi oil, but he also dropped hits that they could increase pressure in other ways. U.S. House Republicans wrote a letter to Saudi Crown Prince Salman saying that, "Failure to reverse oil crisis means they will encourage any reciprocal responses by the U.S. government.

\Worries that Russia may not agree to cut oil production if the U.S. did not participate, seem to be unfounded. Or maybe Russia changed its mind. Kuwait's oil minister is suggesting that the cut could be as much as 15 million barrels a day, no doubt led by Saudi Arabia. The geopolitical pressure on Russia and Saudi Arabia is becoming too much to bear. Reports say that Russia is ready to cut production by 2 million barrels a day. This comes the day after the Algerian oil minister suggested that OPEC was already on track to cut output by 10 million barrels of oil a day. The Russia Energy Minister says Russia is on board with production cuts.

Yet will it be enough? I say it will be. If you look at yesterday's Energy Information Administration (EIA)reports, you might wonder how. The EIA reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 15.2 million barrels from the previous week. At 484.4 million barrels, U.S. crude oil inventories are about 2% above the five year average for this time of year. Total motor gasoline inventories increased by 10.5 million barrels last week and are about 10% above the five year average for this time of year. Finished gasoline and blending components inventories both increased last week. Distillate fuel inventories increased by 476 thousand barrels last week and are 12% below the five year average for this time of year.

U.S. oil demand crashed, and gasoline demand fell the most since 1969. Demand-based on total products supplied over the last four-week period averaged 18.3 million barrels a day, down by 10.7% from the same period the previous year. Over the past four weeks, motor gasoline product supplied averaged 7.6 million barrels a day, down by 19.2% from the same period last year. Distillate fuel product supplied averaged 3.9 million barrels a day over the past four weeks, down by 7.9% from the same period the previous year. Jet fuel product provided was down 22.0% compared with the same four-week period last year.

Yet talk of the cut and talk that some economies are going to start emerging from lockdown is giving trade hope.

Natural gas has been on a tear. Dan Molinski at the Wall Street Journal reports that "U.S. government natural gas data due Thursday are expected to show inventories rose last week by a larger amount than normal as warm weather at the start of the spring season quickly reduced gas-fired heating demand.

The U.S. Energy Information Administration is expected to report gas-storage levels rose by 21 billion cubic feet during the week ended April 3, according to the average forecast of 12 analysts, brokers and traders surveyed by The Wall Street Journal. The EIA is scheduled to release its natural-gas storage data for the week at 10:30 a.m. EDT Thursday. Estimates range from increases of 9 bcf to 33 bcf. The average forecast compares with a 25-bcf increase in storage in the same week last year and a five-year average rise of 6 bcf for that week. A 21-bcf increase last week would mean gas stocks totaled 2.007 trillion cubic feet, 75% above last year's total at this time and 18% above the five-year average for this time of year.

Cold weather in February allowed for significant declines in inventories as homes and businesses cranked up their heaters. But a warm and early start to spring, combined with factory shutdowns due to coronavirus, is pushing inventories higher again.