Crude prices stair-step higher in holiday-shortened trade week

Oil, fundamental analysis

May crude prices managed to stair-step higher this week albeit, on thin volume, during this Good Friday holiday shortened trade week. Short-covering, tighter sanctions on Iran, optimism over trade talks, and a weaker US dollar provided the bullish momentum. An increase in crude stocks was offset by draws in gasoline and distillates.

WTI’s High for the week was Thursday’s $64.85/bbl with the Low of $59.45 printing early Monday. Brent crude saw its weekly High of $68.15/bbl occur on Thursday also while the Low was Monday’s $62.75. The Brent/WTI spread now stands at ($3.25). Both grades settled higher week-on-week. 

The Trump administration issued new sanctions to curb Iran’s oil exports, including the Shengxing Chemical teapot refinery for purchasing more than $1 billion worth of Iranian crude, the second Chinese refiner to be hit with direct sanctions. Meanwhile, the administration expressed optimism regarding trade talks with the EU and Japan. OPEC+ has been targeting members who have over-produced under the previous output quota and Iraq has pledged to cut its shipments by 70,000 b/d to comply. 

The International Energy Adencuy (IEA) in Paris is predicting a slowing of US shale production this year and next due to fewer efficiency gains and lower prices. Meanwhile the Energy Information Administration (EIA) in the US is forecasting a peak of 14 million b/d by 2027.

US Fed Chairman Powell expressed concerns this week that the Trump tariffs will increase inflation and, as a result, the US Central Bank is in no hurry to consider lowering interest rates at the present time. That stance rocked financial and commodity markets. 

The EIA's Weekly Petroleum Status Report indicated that commercial crude oil inventories for last week increased while refined product stocks decreased. Oil production held at 13.5 million b/d. Markets are watching the key storage hub at Cushing, Okla., which has seen declining volumes over the past few weeks. Cushing receives raw crude from several US basins and Canada and sends it out to refineries in the Upper-Midwest and Gulf Coast. 

Jobless claims fell by 9,000 last week to 215,000 and March retail sales jumped 1.4% as consumers stocked-up before the Trump tariffs take effect. However, housing starts fell more than expected last month and the Philadelphia Federal Reserve’s Manufacturing Index dropped 39 points to -26.4, the worst reading in 2 years. In a counter move to the Trump tariffs, the European Central Bank (ECB) has lowered interest rates. At 2.25%, the new rates are 2 points below the US. All 3 major US stock indexes settled lower week-on-week. The USD also ended down which is providing some support for oil prices. 

Oil, technical analysis

NYMEX WTI Futures moved above the 8- and 13-day Moving Averages but fell short of the 20-day MA. Volume is 213,000 as traders shift focus to the June contract as May expires next week. The Relative Strength Indicator (RSI), a momentum indicator, has rebounded to “neutral” level at the “8” mark. Resistance is now pegged at $65.65, the 20-day MA with near-term Support at $63.55 (13-day MA). 

Looking ahead

Tariffs and geopolitics will continue to be the most influential factors for oil price direction in the near term. Questions abound regarding the possible success of trade talks between the US and countries slapped with tariff increases. Then, there’s the always “on-again/off-again” Iran nuclear talks which appear to be stalled at the moment. And, of course, Russia/Ukraine peace talks hang in the air. As we approach May, US refiners should be increasing utilization to meet summer driving demands and to add to inventories. 

Natural gas, fundamental analysis

Despite the uptick in oil prices, US natural gas futures had another down week due to shoulder month demand and the fifth-consecutive storage injection. The week’s High of $3.62/MMbtu occurred Tuesday with the week’s Low of $3.20 set Thursday.

Supply last week was -0.1 bcfd to 112.3 bcfd vs. 112.4 the prior week. Demand was -5.6 bcfd to 103 bcf vs. 108.6 bcfd the week prior, with the biggest decreases coming in residential and power consumption. Exports to Mexico were 6.3 bcfd vs. 6.6 the prior week. LNG exports were 16.8 bcfd (another new record) vs. 16.6 bcfd the prior week.

European gas prices were most recently higher at $10.50/MMBbu equivalent. The EIA’s Weekly Natural Gas Storage Report indicated an injection of 16 bcf, below the forecasted +23 bcf and the 5-year average of +50. Total gas in storage is now 1.846 tcf, falling to 20.6% below last year and falling to 3.9% below the 5-year average.

Natural gas, technical analysis

May 2025 NYMEX Henry Hub Natural Gas futures remain below the 8-, 13- and 20-day Moving Averages and sitting on the Lower-Bollinger Band mark, a BUY signal. Volume was 150,000 and lower than the recent average. The RSI is still oversold at 35. Support is pegged at $3.15 (Lower-Bollinger Band) with Resistance at $3.45 (9-day MA).  

Looking ahead

The near-term forecast indicates pockets of A/C load. However, the last week of April shows a widespread area of above-normal temperatures which should be bullish for gas-fired generation. European storage levels are mandated to be at 90% by Nov. 1, 2025, and are currently off track to meet that target. Observers believe 80% is achievable and would be adequate for the start of winter.