Fundamental Friday: 8 April 2016

Crude oil: As March came to a close last week, production levels of crude oil converged upon a significant amount. The Energy Information Administration estimated the 9.008 million b/d were pumped last week shedding 16,000 b/d of output. Over the past month, a decline of 70,000 b/d has been recorded after four straight drops in production. Since the beginning of this year, 211,000 b/d worth of production has been halted supporting the growth of oil prices. A continuance of this trend could result in bullish pressure on prices. Stocks fell by about 5 million barrels in the last week of March. This decline ended five straight weeks of gains which will likely add to the bullish pressure from production decreases. Nevertheless, March's net change for crude oil stocks was about 9 million barrels.

Refinery capacity increased last week as well fueling bullishness. Crude oil inputs jumped again last week, up 200,000 b/d to 16.433 million b/d total. Refinery utilization also gained one full percentage point after a month of mixed movement. The short-term estimations hint that a maintenance season is coming to a close. There may be more interesting developments concerning crude oil fundamentals as details about the Exxon refinery are released.

The WTI spot price gained 7.80% to $39.72 this week, mostly because of a 6.5% jump on Friday. Brent crude spot price gained 8.33% to $41.94 this week with a similar pattern of trading on Friday.

Natural gas: Natural gas fundamentals continue to meander about through the end of March. Total stocks increased slightly by 12 bcf in the last week. The net change for the month sits at 1 bcf, following meager changes in supply and demand. One more gas rig became operational during last week for a loss of 5 rigs for the month. Supply and demand changes from last week were at 1.1% and 0.5% respectively. A short term trend in natural gas fundamentals remains unclear.

Traditionally, natural gas analysts mark the end of March as the end of the heating season. The EIA created a chart that showed this year's withdrawals and a comparison to previous years using seasonal analysis. Stocks at the beginning of the winter were some of the highest over the past few years. Ending stocks were 868 bcf or 54% higher than the 5-year average. A disappointing withdrawal season due to warmer weather and excessive production could keep natural gas prices low.

The Henry Hub spot price ventured through a volatile week of a 1.78% gain. Initial losses on Tuesday and Wednesday were reversed by a steep gain on Thursday. The price sits just short of $2 at $1.99 after settlement at the end of the week.

Gasoline: Finished motor gasoline stocks rose by about 740,000 barrels to 26.873 million barrels over the past week.Component gasoline stocks rose at a slightly slower pace, about 700,000 barrels to 217.125 million barrels in the same period. The March short-term trend for these stocks remained unclear with finished gasoline ending higher and component gasoline ending lower. Finished gasoline production was also boosted by about 200,000 b/d and product supplied jumped 414,000 b/d to levels around the beginning of the month. As refineries come back online, the increase in production should be balanced out by more demand from warmer weather.

Gasoline prices rose across the country for the eighth straight week to a U.S. average of $2.083 a gallon. The difference from a year ago, $0.33 continues to shrink as demand will see an increase in the summer, and crude oil production falls. Diesel prices, though, showed little to no movement across the country with the average U.S. price to fall just $0.006. If the current trends continue, diesel prices will be lower than most regular averages per gallon.