Written Commentary
CRUDE OIL
Fortunately for the bull camp global equities are throwing off positive sentiment to start the trading week as a US strategic supply sale of 18 million barrels looms later this week and global crude oil in floating storage increased by 2.5% on the week. In a longer-term negative, the oil rig operating count last week increased by four and has reached the highest level since April 2020. Going forward it seems that the macro-economic outlook for China and Chinese energy demand has improved slightly over prior weeks, with the markets seeing the Chinese central bank in a more proactive supportive position.
While the latest rulings from the EPA are very confusing (their policy decisions tried to make environmental, biofuel and fossil fuel constituencies happy) and therefore the net takeaway for gasoline prices is at best murky. On the other hand, the US President has predicted that US fuel prices will come down in the weeks ahead but without softer demand off the omicron variant, that is unlikely to happen. On the other hand, fuel oil in floating storage off Singapore last week increased by 12% which casts some doubt on the level of Chinese demand.
NATURAL GAS
About the most supportive thing that can be said about the global weather outlook for natural gas is that the markets are aware of an ongoing mild pattern and perhaps that was priced in with last week’s spike low! On the other hand, there is a serious Eastern European supply threat looming with the Ukrainian secretary of state suggesting it would be difficult to see gas flow through the Nord Stream 2 pipeline if Russia shows aggression against the Ukraine.
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