The Commodities Feed: European gas sell-off continues. Oil prices are largely under pressure amid demand concerns, while the European gas market continues to sell off aggressively.
Oil prices continued to trend lower yesterday amid uncertainty over the outlook for tariffs, a dynamic overshadowing sanction risks. After imposing additional sanctions on Iran’s oil industry, the Trump administration is now eyeing Venezuela, ending Chevron’s licence to operate in the South American nation. Previously, Chevron was allowed to operate there and, despite sanctions, export crude to the US. This development has boosted differentials for medium sour crude grades, such as Mars Blend. Its differential jumped by more than US$1/bbl to US$1.71/bbl. US imports of Venezuelan crude oil have averaged almost 270k b/d so far this year.
US Energy Information Administration (EIA) weekly inventory data were fairly neutral. Over the last week, US commercial crude oil inventories fell by 2.33m barrels, the first decline in stocks since mid-January. It’s also the largest decline in inventories since December. Strong refinery activity is behind the drop in inventories; refiners increased their utilisation rates by 1.6pp week on week. However, we only saw a marginal build in gasoline stocks, which rose 369k barrels. A stronger build was seen in distillate inventories, which grew by 3.91m barrels.
European natural gas prices came under additional pressure yesterday. TTF fell by almost 6.7%, leaving prices at their lowest level since mid-December. From a technicals perspective, the scale of the move in recent weeks has left the market in oversold territory. Investment funds have been aggressively reducing their net long in TTF, selling 27.4TWh over the last reporting week. This left funds with a net long of 231.3TWh. Recent mild weather has contributed to the weakness. However, with storage at just 40% full, the region faces challenges in refilling storage, relying more on LNG imports. The recent price weakness has TTF trading below spot Asian LNG, which should see slower flows into Europe. The scale of the move lower also suggests the market is starting to price in prospects for a Russia-Ukraine peace deal, one that could include the resumption of some Russian pipeline gas to Europe. If this happens, it changes the outlook for the European market significantly.
