Phil Flynn of PRICE Futures Group asks: Is Russia’s claims of ‘success’ in the battle to take the Ukraine city of Mariupol the possible beginning of the end of the Russia Ukraine war?

Crude Oil (CL=F) prices thought about it. Oil prices were starting to overcome oil demand worries caused by a weak IMF economic forecast and talk of rising US interest rates when it got hit with a stunningly bullish Energy Information Agency (EIA) status report. The EIA report included record-breaking petroleum exports and dangerously low distillate inventories, not to mention demand numbers that were pointed in a bullish direction.

Yet the trade was choppy as fears about slowing growth in the future clouded the very bullish data in the present and uncertainty as to whether Europe could extricate itself from Russian oil in the near term. That caused position squaring, which led to more volatility on the day the May futures contract expired. The back end of the curve seemed to perform better than the front end of the curve.

Yet even with a massive 4.7-million-barrel release from the SPR, crude supply still fell by eight million barrels showing quite clearly that the massive oil release is not having the impact on supply that the Biden administration had hoped. Besides, almost all of the SPR oil was exported. The EIA reported that crude exports hit 4.2 million barrels the highest since March of 2020.

The Energy Information Administration also reported that US distillate fuel inventories fell by 2.7 million barrels. This is a huge concern because supplies of distillate are at the lowest level since 2008 and 20% below the five-year average. That is going to continue to provide upward pressure on diesel prices enhancing truckers and farmers wondering why the US is exporting so much diesel supply when our inventories are so low.

The EIA reported that the US exported a record amount of petroleum products to the tune of 10.6 million barrels a day. That is a historic number and if it’s repeated, one would expect that we would see an upward tick in both gasoline and diesel prices.

That reality started to sink in in overnight markets, causing a rally. Oil prices were up strong overnight only to pull back a bit on Russia’s claims that they had taken Mariupol. That claim of victory has some starting to speculate that this could give Russian President Vladimir Putin enough to declare a win and then find a way to start an end to the Russia Ukraine war.

The AP reported that Russian President Vladimir Putin ordered troops to not storm the Azovstal steel plant, the last Ukrainian holdout in the besieged port city of Mariupol, on Thursday, opting instead for a blockade. He claimed in a televised meeting that breaching the plant was “unnecessary,” claiming he was concerned about the welfare of Russian troops. He also urged Ukrainian fighter holdouts in the city to surrender, according to Reuters. Several deadlines imposed by Russia to surrender the city have passed. Russian Defense Minister Sergei Shoigu said the rest of the city had been “liberated,” prompting Putin to declare “success” in the devastated city. 

However, leaving the plant in Ukrainian hands robs the Russians of the ability to declare complete victory in Mariupol. The city’s capture has both strategic and symbolic importance.

Demand for gasoline and diesel fuel was up in the report as well. Oil watcher Tim Dallinger suggests that the record exports of petroleum probably skewered the demand numbers to the downside, he seems to think that the demand is stronger than the numbers show. I believe he’s right. Some traders focused on the four-week moving average for demand. The EIA showed that total demand in the US was at 19.4 million barrels a day and that is down 1.5% from last year. The four-week moving average for gasoline demand at 8.7 million barrels a day, down 3% from last year, and distillate demand came in at 3.7 million barrels a day, which is down 6.4% from the year before

Natural gas prices broke on a potential break in winter weather. I don’t know about your part of the map but here near the Illinois Wisconsin border, we expect spring to come in today at around noon and end at 3:00 PM. Then I think we go back to winter and then I think we go right into summer. The big picture, despite the recent pullback, in natural gas prices are the fundamentals going into summer and even into next winter looking very, very bullish even with expectations that US natural gas production will rise in the future. It appears that we’re going to continue to have a hard time keeping up with the demand, and that is especially true if we get extreme weather either on the cold side or the hot side. That means today traders will focus very intently on the Energy Information Administration natural gas report.

Dan Molinski at the Wall Street Journal writes that the natural gas data due today is expected to show inventories rose last week by an amount slightly below average as a final bout of cool weather in some regions helped maintain a relatively strong demand.

The Energy Information Administration is expected to report gas-in-storage levels increased by 35 billion cubic feet during the week ended April 15, according to the average forecast of 12 analysts, brokers, and traders surveyed by The Wall Street Journal. The EIA is scheduled to release its natural-gas storage data for the week at 10:30 AM ET Thursday. Estimates range from increases of 17 bcf to 53 bcf. The average forecast compares with a 42-bcf increase in storage in the same week last year, and a five-year average injection also of 42 bcf. A 35-bcf increase last week would mean gas stocks totaled 1.432 trillion cubic feet, 24% below last year’s total at this time and 18% below the five-year average for this time of year.

December saw a very mild start to winter, but January and parts of February, March, and April have seen stronger-than-normal periods of wintry weather that boosted heating demand and created a bullish inventory deficit compared with five-year averages.

Learn more about Phil Flynn by visiting Price Futures Group.