Written on: April 3, 2023

Energy Price Report

Monday, April 3, 2023

Crude futures are extending their rally for a third session this morning.  Gains are accelerating following the announcement of surprise OPEC+ output cuts.  Also supportive was weakness in the dollar, strength in Asian equities and flat-to-higher trade in European stocks, whereas US stock market index futures were mixed. Market participants are looking ahead to US manufacturing and construction spending data for further direction.

Reuters reports that OPEC+ announced production cuts of 1.16mb/d, to begin in May and last through the end of the year. Saudi Arabia (500kb/d) and its Gulf allies the UAE (144kb/d), Kuwait (128kb/d), along with Iraq (211kb/d) are to account for the lion’s share of the cuts. Non-OPEC cuts are to come from Kazakhstan (78kb/d) and Oman (40kb/d). According to S&P Global, OPEC parties with output targets produced 866kb/d below target in February and non-OPEC production was 1.05mb/d below target, for combined total underproduction of 1.91mb/d. The 1.16mb/d of cuts, plus the previously announced 500kb/d in Russian cuts that began this month, would cut that gap down to 0.25mb/d.

The Hang Seng edged up 0.04%, the Nikkei gained 0.52%, and the Shanghai Composite strengthened by 0.72% last night. The Nikkei/S&P Global Manufacturing PMI for India rose from 55.3 in February to 56.4 last month, indicating expansion in the sector accelerated. In European news, the final S&P Global Manufacturing PMI for France saw a surprise downward revision to 47.3, but the German index was a surprise upward revision to 44.7, as did the index for the Eurozone as a whole, to 47.3. As of this writing, the German DAX was off 0.2%, but the French CAC 40 had gained 0.3%. The final March UK CIPS/S&P Global Manufacturing PMI saw a slight downward revision to 47.9. Nevertheless, the FTSE 100 was up by 0.6% this morning. In the US, Dow futures were up 0.3% but S&P 500 futures were down 0.1% and Nasdaq futures had lost 0.7%. Meanwhile, a 0.1% dip in the US dollar index was supportive for crude.

The complex strengthened across the board on Friday amid strength in equities, despite strength in the US dollar. Brent crude gained 50 cents, closing at $79.77 a barrel, WTI crude jumped $1.30 higher to settle at $75.67 a barrel, gasoline futures settled 3.91 cents higher at $2.7005 per gallon and heating oil jumped 5.26 cents higher to settle at $2.6763 per gallon.