BRENT’s six-month calendar spread from July 2023 to January 2024 has narrowed to a backwardation of around $1.75 per barrel from more than $4.00 on April 12 as the impact of OPEC⁺ production cuts has been offset by concerns about the outlook for the global economy and petroleum consumption:
U.S. INTEREST RATE traders have cut expectations for the path of rates following the regional banking crisis and amid signs both business activity and price rises are slowing. Projected interest rates have reverted to their level at the start of February, before anxiety about inflation increased:
U.S. SERVICE SECTOR inflation has decelerated significantly though it is still running faster than the central bank target. Services prices rose at an annualised rate of +5.8% over the three months ending in March, while prices excluding rent of shelter rose at an annualised rate of +2.7%:
EUROPE’s gas storage sites reported small net inflows on March 18 and March 19, a tentative sign the winter inventory depletion season is coming to an end early. The data is provisional and contains a mix of confirmed reports and estimates. But storage across the European Union and the United Kingdom was 55.8% full on March 19, the second-highest for the time of year after winter 2019/20 (56.2%) and well above the prior ten-year average (34.8%):
U.S. INTEREST RATE markets steadied on March 16 as the Federal Reserve organised major national banks to help boost confidence in their smaller regional counterparts by placing large-scale deposits with First Republic bank. Rate forecasts firmed slightly. But the rate trajectory implied by futures prices still shows rates declining from August onwards as the central bank responds to tightening credit conditions and a slowing economy:
NORTHWEST EUROPE is roughly 85% of the way through the heating season. Temperatures at Frankfurt in Germany have been close to the long-term seasonal average since the start of March. But very warm temperatures in October and from mid-December to mid-January have left a significant deficit in heating demand that has not been erased. The total number of degree days so far this winter (1540) is -16% below the long-term average (1842):
U.S. MANUFACTURERS reported business activity declined in February for the fourth month running. The ISM composite activity index was 47.7 in February up marginally from 47.4 in January but both readings were in only the 16th percentile for all months since 1980. New orders fell for the sixth month in a row. The new orders sub-index (47.0) was in only the 14th percentile for all months since 1980:
U.S. DISTILLATE inventories were unchanged over the seven days ending on February 24. Stocks were -14 million barrels (-11% or -0.87 standard deviations) below the prior ten-year seasonal average but the deficit has narrowed from -31 million barrels (-22% or -2.5 standard deviations) on October 7:
U.S. INTEREST RATE traders expect the central bank to increase its target fed funds rate by two more quarter-points before July 2023 reaching 5.00-5.25% up from 4.50-4.75% at present. The forecast has increased by a quarter-point following stronger than expected employment data for January. The interest rate path has been repeatedly revised upward over the last year as inflationary pressures have proved more persistent than expected:
U.S. GAS front-month futures prices have slumped to less than $3.80 per million British thermal units (34th percentile for all months since 1990) from more than $9.10 (86th percentile) at the end of August. Figures have been adjusted for inflation using the core consumer price index for all items excluding food and energy:
U.S. PETROLEUM INVENTORIES including the strategic reserve fell by -4 million barrels in the week to November 4. There were only minor changes in stocks of distillate fuel oil (-1 million barrels), jet fuel (+1 million barrels) and gasoline (-1 million barrels). Total inventories have depleted by -498 million barrels since the start of July 2020 and are at the lowest seasonal level since 2004:
LONDON’s temperatures have been higher than the long-term seasonal average consistently since the middle of October, reducing heating demand and gas consumption. The number of heating degree days so far this winter has reached just 117 compared with a long-term average of 153. But the city-region is only 10% of the way through the expected heating season. The half-way point doesn’t normally arrive until January 23 as a result of seasonal lag:
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ATMOSPHERIC concentrations of carbon dioxide (CO2) at the Mauna Loa observatory on Hawaii rose to 415 parts per million (ppm) in October 2022 up from 404 ppm in October 2017 and 391 ppm in October 2012. CO2 concentrations have increased at a compound annual rate of +0.57% per year between 2017 and 2022. On the current trajectory, concentrations are likely to reach 430 ppm, the maximum scientists say is consistent with +1.5°C of average global warming, in 2027:
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