OPEC & Russia stay committed to production cuts as overall crude oil demand increases, reports Phil Flynn, senior energy analyst at Price Futures Group.

If you were looking for the commitment to production cuts of the OPEC and Russia to waver at the meeting in Baku, Azerbaijan, you had better forget about it. In fact, not only did OPEC plus 1 decide to continue to follow through with cuts, they even canceled their April meeting because they think it would be too early to decide about changing oil output levels.

You also had a commitment by Russia to be at full compliance by April and that should not change until the next OPEC plus meeting in June. This comes as U.S. oil producers are still cutting back as rig counts fall to the lowest level since April 2018, and the first four- week consecutive drop since May of 2016, according to Reuters.

The market obviously will tighten and may fall into an undersupplied situation as Venezuelan oil is still off the market and demand in the United States, China and Europe is likely to come in better than anticipated. Reuters reported: “The broad coalition implemented cuts in February that achieved about 90% of the amount it agreed to, Saudi Energy Minister Khalid al-Falih said at a press conference following the group’s technical meeting. In March the cuts will be “above 100% easily,” he said, meaning the coalition will hold back slightly more than the 1.2 million daily barrels.”

Russian Energy Minister Alexander Novak said his country is now complying with agreed-upon reductions of 230,000 barrels-per-day. He said the delays were due to freezing weather conditions.

This comes as U.S. oil production is seeing slight downgrades in the overly optimistic production reports. Drillers cut one oil rig in the week to March 15, bringing the total count down to 833, the lowest since April 2018.

RBOB gasoline futures have been outperforming ultralow distillate. Strong early demand for gasoline seems to suggest that we will break records on both gallons of gas consumed as well as miles driven. A historically low unemployment rate along with rising wages should spur on this record demand. Hedgers are doing well with their hedges. Speculators should look for the possibility of price spikes and should start buying the breaks. Look for option trades as well, and bull oil spreads.

Texas City has had a bad explosion over the weekend. Reuters reported: “A storage tank fire on the Houston Ship Channel sent a plume of black smoke across the eastern half of the city on Sunday forcing residents in the suburb of Deer Park, Texas, to remain indoors. A giant storage tank containing volatile naphtha at Intercontinental Terminals Co (ITC) Deer Park site continued to burn six hours after the blaze broke out at about 10:30 a.m. CDT (1530 GMT).”

Ships were continuing to move along the ship channel, which connects refineries and chemical plants in Houston and Texas City, Texas, with the Gulf of Mexico. The only restriction on shipping was an order from the U.S. Coast Guard not to dock at ITC or an adjoining terminal.