Guardian Mineral Management presents the ‘Weekly Oil & Gas Commentary’ series, offering timely updates and expert analysis on the ever-evolving oil and gas markets. Led by industry veteran Tom Seng, this series provides valuable insights that help mineral owners make informed decisions. Stay ahead of market trends with our in-depth commentary and understand the implications for your mineral assets.

Oil – Fundamental Analysis

The 9-day downtrend in oil prices reversed this week as both the US Navy and Iran block different areas of the Persian Gulf. A decrease in crude inventory didn’t dampen higher prices as draws in refined products offset the gain. WTI’s high was Thursday’s $98.40/bl. while the Low was Friday’s $85.45. Brent crude for June traded in a similar pattern with its high on Thursday  at $107.40/bl. and the low on Monday at $92.75. Both grades settled higher than last week and the WTI/Brent spread is now ($5.45).

The US Navy is blocking Iranian ports and instructing ships to turn back. Meanwhile, the IRGC continues to control the Strait of Hormuz while the Iranian government has stated that will continue so long as the US Navy blocks their ports. The IRGC capture two vessels in the Strait of Hormuz and fired upon another even after President Trump extended the deadline of the ceasefire. However, he ordered the US Navy to continue its blockade. On Thursday, US forces boarded a sanctioned Iranian oil supertanker after having intercepted two other Iranian oil tankers that attempted to evade the blockade.

The US President has also extended the current Jones Act waiver for another (90) days to aid in the movement of oil, refined products and fertilizer around the country. And, despite optimistic statements from the US, Iranian officials have insisted they will not meet for negotiations until the US naval blockade is removed, and Israel halts all bombing in Lebanon. Pakistani officials are said to be trying to get Iran to agree to re-starting peace talks.

While most of Asia is now struggling with oil and fuel supplies, China and Japan have reported reserves of both that will sustain them for some period of time yet. Meanwhile, the Executive Director of the IEA has categorized the current Middle East situation as “the biggest energy security threat in history” and that it has hamstrung the global economy. The IEA is estimating a current loss in supply of 13 million bld. of crude and 100 billion cubic meters of natural gas.

The Energy Information Administration’s Weekly Petroleum Status Report indicated that commercial crude oil inventories for last week decreased -1.9 million bl. to a total of 466 bl. million and 3% above the 5-year average. It was the 2^nd  decline in-a-row. The API forecasted -4.4 million bl. while market analysts foresaw a drop of -1.0 million bl. US refinery utilization was 89.1% down from 89.6% last week representing -55k bld. to 16.0 million bld. Gasoline demand dipped by -33k bld. to 9.06 million bld.  Total motor gasoline stocks decreased -4.6 million bl. to 228 million bl. and are now -0.5% below the 5-year average. Distillates were -3.4 million bl. at 108 million bl. and are now at -8% below the 5-year average. Inventory at the key Cushing, OK hub changed +0.8 million Bbl. to 30.6 million Bbl. or 40% of capacity. The SPR was -4.1 million bl. to 405 million bl. (Part of the pledged release.) Imports of crude oil were +790k million bpd. to 6.1 million Bbld. vs. 5.3 the prior week while exports were 4.8 million bpd. vs. 5.2 the prior week. It is expected that the US could hit a new record high of 5.5 million bld. in crude exports this month based upon global demand. Exports of petroleum products were 8.1 million bpd. last week vs. 7.5 the prior week. Total US oil production was 13.6 million bld. last week vs. 13.6 the prior week and 13.5 last year at this time. Total US active rigs were +1 to 544 vs. 587 last year with -3 oil, +4 in gas.

AAA’s average US retail gasoline prices continue to rise at the pump due to the war and were most recently reported at $4.06/gal., -0.02/gal. vs. last week, +$0.08/gal. from last month and +$0.89/gal. more than a year ago.

US consumer confidence fell to 49.8 this month, down from March’s 53.3. Respondents in the survey are also expecting inflation to increase in the coming months citing higher energy prices. Claims for unemployment benefits rose by 6k last week to 214k, above forecasts calling for 214k. Consumer prices rose by +3.3% last month due to gas prices that have risen on a percentage basis by the most in decades. This was up from February’s +2.4% reading. The economy did add +178k jobs last month which placed unemployment back at 4.3%. The Dow is lower week-on-week while the S&P and NASDAQ have both posted weekly gains. The USD is slightly higher than last week but is not stifling crude’s rally. Gold is down on the week as well.

Looking Ahead

The US is currently in an enviable position relative to crude supplies. While we only produce just under 14 million bld. of oil while consuming 16 million bld. at our refineries, we receive heavy crude via pipeline from Canada and by tanker from Venezuela. A small amount also is also imported from Mexico. So, supply disruption is not so much of an issue as is price since we do import and export in the global oil market. No one knows what will happen next with the US/Iran war. If talks resume, that will certainly lead to optimism about an eventual peace agreement and the full opening of the Strait of Hormuz. However, President Trump’s ever-changing rhetoric continues to fuel volatility in crude markets. We are, once again, heading into unknown territory as the weekend is upon us and markets are closed until Sunday evening. And we are now just (5) weeks from the start of the official summer driving season.

Natural Gas – Fundamental Analysis

May NYMEX natural gas futures reversed the recent short-term uptrend to continue the 6-week downtrend on mild weather and a larger-than-expected storage injections despite healthy LNG export volumes. The week’s High was Wednesday’s $2.76/MMBtu while the Low was Friday’s $2.50. Natural gas demand this week has been estimated at about 95 Bcfd while production was thought to be 106 Bcfd. LNG exports are averaging about 13 Bcfd so far this year with daily volumes here in April pushing up to 19 Bcfd equivalents. This is helping to offset the loss of Qatari shipments. In the UK, natural gas prices at the NBP were most recently back up to $14.95/MMBtu. Dutch TTF futures were also higher at $15.30/MMBtu.  Asia’s “JKM” was quoted at $16.40/MMBtu as Asian and European markets are essentially competing for the same shipments. 72% of Europe’s LNG imports are coming from the US.  The EIA’s Weekly Natural Gas Storage Report indicated an injection of +103 Bcf vs. a forecast of +55 and a 5-year average of +50 Bcf.  Total gas in storage is now 2.063 Tcf, now at +7.4% above last year and 7.1% above the 5-year average.

Looking Ahead

Global LNG prices have rebounded this week as the US/Iran war drags on. US storage levels are running above-normal and should remain that way given that April is typically a “shoulder” month. This week’s injection was historically huge compared to the average.  The 8-14-day forecast shows some areas of below-normal temperatures for early May which could provide some demand still for space heating. In other areas, “below-normal” represents mild temperatures where A/C won’t be needed. Once again, given the infrastructure limitations on US LNG export volumes, domestic natural gas prices remain under pressure.