The Suez Canal is still clogged up, cutting off circulation to the global oil market. The MV Ever Given container ship is still stuck blocking the waterway as reported and anywhere from 165 to 185 vessels are waiting to resume trips to their destinations. The longer it takes, the bigger the hit we may see to the global economy.

Bloomberg News reports, “a back-of-the-envelope calculation shows there’s about $9.6 billion worth of daily marine traffic halted by the massive container vessel that lodged in the Suez Canal earlier this week, blocking transit in both directions. The figure is based on an assessment by Lloyd’s List that suggests westbound traffic is worth around $5.1 billion a day and eastbound traffic approximately $4.5 billion. The industry journal concedes that these are “rough calculations,” however. About 185 vessels are waiting to transit the waterway, data compiled by Bloomberg show, while Lloyd’s estimated 165.

Now some reports suggest that it might take until Sunday to finally reopen the canal. That is when the tide rises. Oil traders bought on the clogged arteries news but many know that if that is the only reason for buying, it will have a limited shelf life. Already, new oil shipments will look at alternative routes and the canal at some point will reopen. Still, oil recovery was substantial, and it was helped also by strong record-breaking German manufacturing data and some bullish leading oil indicators in yesterday’s Energy Information Administration (EIA) weekly petroleum status report.

The EIA reported that U.S. crude oil refinery inputs jumped to an average of 14.4 million barrels per day. That was an impressive 1.0 million barrels per day more than the previous week’s average. We saw a big jump in runs as refineries operated at 81.6% of their operable capacity last week. Still, gasoline production decreased averaging 8.6 million barrels per day. Refiners have work to do. Distillate fuel production increased last week, averaging 4.6 million barrels per day. Bottom line, we should see crude draws going forward as refiners continue to increase runs and US imports fall.

Overall, the tally showed crude oil inventories increased by 1.9 million barrels from the Clogged Artery the previous week. At 502.7 million barrels, U.S. crude oil inventories are about 6% above the five-year average for this time of year. Total motor gasoline inventories increased by 0.2 million barrels last week and are about 3% below the five years, the average for this time of year. Finished gasoline inventories decreased while blending components inventories increased last week. Distillate fuel inventories increased by 3.8 million. barrels last week and are about 1% above the five-year average for this time of year.

Today we will also get the EIA natural gas report. The report may determine whether we have hit a bottom in the market. Andrew Weissman of EBW Analytics says that natural gas futures have managed to stave off further declines after closing just above $2.48/MMMBtu twice last week. But continued weak, weather-driven demand and narrowing storage deficits may yet prove overpowering.

Much milder-than-normal weather forecasts may weigh on natural gas into mid-April, erasing most of the storage deficit vs. the five-year average. Today’s Weekly Storage Report carries increased heft following three straight bearish reports and concerns over extended industrial demand outages. A supportive number could lend confidence in stronger fundamental footing for natural gas.

By late spring, bullish catalysts await natural gas: planned local distribution company injections, elevated LNG feedgas demand, weak natural gas production, higher chances for bullish weather, stronger industrial demand, seasonally greater power burn, and a likely economic boom. Futures will likely establish a firm bottom in the next 30-45 days and begin moving higher by early summer.

Reuters reports that U.S. utilities likely pulled a smaller-than-usual 25 billion cubic feet (bcf) of natural gas from storage last week even though temperatures were in line with normal, a Reuters poll showed on Wednesday. That will likely be the last withdrawal of the 2020-2021 winter heating season and compares with a decline in inventories of 26 bcf during the same week a year ago and a five-year (2016-2020) average withdrawal of 51 bcf. Utilities withdrew 11 bcf of gas from storage in the prior week ended March 12. If analysts are on target, the draw during the week ended March 19 would take stockpiles down to 1.757 trillion cubic feet (tcf), 3.7% lower than the five-year average and 12.5% below the same week a year ago.

The U.S. Energy Information Administration (EIA) will release its weekly storage report at 10:30 a.m. EDT (1430 GMT) on Thursday.

Phil Flynn
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