Written Commentary
CRUDE OIL
Despite an upward revision in International Energy Agency demand, a definitive risk on vibe flowing from equities and a weaker dollar, the crude oil market is trading sharply lower to start today. Obviously, the liquidation is likely the result of parts of the Russian force along the Ukraine boarder is reportedly returning to their original bases as that reduces the threat of an embargo on Russian oil. On the other hand, one should not underestimate the importance of Russian oil supply on the world market as Russia produces 8.4% of the world’s oil. In addition to the declining threat against Russian supply, the markets are also reacting negatively to news that US Permian oil production will hit a record high next month.
Like the crude oil market, the April gasoline contract forged a new contract high, but the market has reversed course aggressively this morning in a fashion that suggests the short-term trend is now pointing down. However, reports that Russia is responsible for 20% of world Naphtha supply, very tight diesel stocks in Europe and Singapore, active high-frequency activity measures, last week’s strong US implied gasoline demand reading, and a falling US daily infection count should have given the bull camp a cushion today.
NATURAL GAS
The April natural gas contract forged a 5-day high overnight, and that is impressive given reports that a portion of Russian troops have returned to home base. Obviously, the threat against Russian supplies will remain the dominating issue in the natural gas market until the Russians pull back all troops from the Ukraine border region. While strength in European gas prices resulted in a ripple of higher prices in Asia yesterday, the Asian markets have fallen back this morning.
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