Looking to the Futures
Oil Prices Soar on Potential Supply Disruptions
Crude oil futures (/CLJ26) rose sharply the past week as the Iran war has halted most of the transport of energy products through the Strait of Hormuz, which handles nearly 20% of the world’s oil shipments.
Early in Sunday evening trading, crude prices jumped to as high as 119.48 in the April front-month contract after Kuwait said it would reduce production due to limited storage capacity, with most energy flows through the Strait of Hormuz still disrupted.
In addition, in its Weekly Petroleum Status Report, the Energy Information Administration (EIA) said crude oil stockpiles rose by 3.5-million barrels during the week ending February 27. This was above expectations for a 2.3-million barrel storage build.
Oil inventories, excluding the Strategic Petroleum Reserve, stood at 439.3 million barrels, 3% below the five-year average.
U.S. oil production declined by 6,000 barrels per day last week and averaged 13.696 million barrels per day. This was 188,000 barrels per day higher than one year ago.
On the oil product side, distillate inventories increased by 400,000 barrels, which was contrary to expectations for a 2.6-million barrel draw. Distillate inventories are now 3% below the five-year average for this time of year.
Gasoline inventories declined by 1.7-million barrels, which was above expectations for an 800,000 barrel draw. These stockpiles are now 4% above the five-year average.
EIA said gasoline production increased from the previous week and averaged 9.3-million barrels per day. Distillate production also increased last week, averaging 4.8-million barrels per day.
The agency also reported that U.S. ethanol production fell last week, averaging 1.095 million barrels per day. Expectations were for a decline to 1.10 million barrels per day.
U.S. ethanol inventories rose to 26.3 million barrels last week. Traders were expecting inventories of 26 million barrels.
Digging further into the EIA report, refinery utilization increased by 0.6 percentage points to 89.2% last week. Expectations were for an increase to 89.4%. U.S. gasoline demand fell by 442,000 barrels per day to 8.292 million barrels per day. Distillate demand also fell last week, declining by 198,000 barrels per day to 3.698 million barrels per day.
Oil storage in Cushing, Oklahoma, the delivery point for the WTI Crude Oil futures (/CL) contract, rose by 1.6-million barrels last week to 26.5-million barrels.
The U.S. crude oil rig count fell by two and now total 407 rigs during the reporting period ending February 27. That is down 16.3% from a year ago according to energy services firm Baker Hughes’ North American Rotary Rig Count report.
This morning, U.S. stock index futures moved lower in the early hours with the S&P 500® (–1.14%), the Nasdaq-100® (–1.22%), the Russell 2000® (–2.04%), and Dow Jones Industrial Average® (–1.28%) all in the red.
In Asia, major indexes closed lower, with the Hang Seng (–1.35%), the Nikkei (–5.20%), and the Shanghai (–0.67%) posting losses.
European trading saw the DAX (–1.64%), the CAC (–2.03%), and the FTSE (–1.32%) markets move lower by midday.
Futures on the move
Natural gas futures (/NGJ26) ended Friday’s trading session in the green (+6.09%) as a bullish U.S. gas inventories report and surging crude oil prices sparked a bit into natural gas futures and sending the lead month April contract to one-month highs.
The U.S. Energy Information Administration (EIA) reported U.S. natural gas inventories saw a 132 billion cubic foot (Bcf) draw during the week ending February 27. This was above expectations for a 121 Bcf draw. U.S. gas inventories are currently –2.2% below the 5-year average but 6.5% above last year.
In addition, the National Weather Service Climate Prediction Center is forecasting above normal temperatures from March 12th to March 18th for most of the western and southern portions of the 48 states with below normal temperatures seen in the northern parts of the U.S. during this time period.
Soybean oil futures (/ZLK26) closed modestly higher on Friday (+1.34%), with the lead-month May contract trading at levels last seen in late 2022. Strength in crude oil prices spilled over into soybean oil, as demand expectations for biofuels tend to improve alongside higher energy prices.
U.S. Dollar Index futures (/DXH26) paused their recent rebound on Friday (–0.33%) after U.S. employment data came in notably weaker than expected. February nonfarm payrolls declined by 92,000 jobs, missing expectations for a 60,000‑job increase. The unemployment rate also edged higher to 4.4%, compared with forecasts calling for it to hold steady at 4.3%.
What else to watch today
Major economic reports, trading events, and news items that could potentially impact specific futures markets:
New York Fed Consumer Inflation Expectations for February (interest rate)
Today’s trading events
Last Trading Day: March Cotton
Treasury auctions
3-and 6-month T-bills
New Products
New futures products are available to trade with a futures-approved account on all thinkorswim platforms:
- Ripple (/XRP)
- Micro Ripple (/MXP)
- 100 OZ Silver (/SIC)
- 1 OZ Gold (/1OZ)
- Solana (/SOL)
- Micro Solana (/MSL)
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