Written Commentary
CRUDE OIL MARKET
Just as big picture macroeconomic negatives pummeled the crude oil market throughout most of November and early December, big picture positive macroeconomic conditions off less omicron fears should lift crude oil prices aggressively. While it is unclear if the omicron news shift over the last 24 hours will sustain, the threat of energy demand destruction has moderated. Furthermore, seeing tensions between Russia and the Ukraine escalate, and with the US threatening increased sanctions against Russian oil companies, (if they violate Ukraine sovereign territory) traders should not underestimate the magnitude of gains in energy prices ahead.
Like the crude oil market, the gasoline market appears to have forged a significant bottom with the spike below and the rejection of the $1.90 level in the January RBOB contract. However, like the rest of physical commodity markets today talk that the omicron variant might not produce severe of health problems is a major assistance to energy product demand hopes.
NATURAL GAS
With a major gap down/range down extension in natural gas to start the trading week, the market has become significantly oversold especially with the market already holding a moderately large net spec and fund short. Despite the coldest weather of the season in the Midwest overnight, the US weather forecast 5 days out shows above normal temperatures, the 6-to-10-day forecast shows some regions to be 15 degrees above normal and the 11 to 15 day forecast projects most regions to be moderately above normal.
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