Written Commentary
CRUDE OIL
Given early action in crude oil this morning the trade is more fearful of demand destruction from Russian actions than from the prospect of disrupted Russian oil exports. However, in the background US daily infection counts have fallen precipitously and for some that improves the demand outlook. Furthermore, oil futures price curves in London are reportedly at the tightest ever despite wild daily price swings! Therefore, it is not surprising to see London traders forecast Brent crude to reach $100 but given the highly uncertain and extremely fluid condition along the Ukrainian border, $3 and $4 daily swings could be seen. While rumors and headlines from Iranian nuclear negotiations are as suspicious as headlines from Russia talk of a deal did prompt a significant setback from the highs yesterday.
While April gasoline showed respect for the $2.80 level on the charts for a third straight session and some technical traders suggest that has become a shelf from which prices will work higher from, this morning’s action negates that view. From a supply perspective, the weekly EIA report showed the annual deficit in gasoline stocks expanded to 10 million barrels which suggests repair of tightness has not taken place yet.
NATURAL GAS
While the source of the rally in natural gas yesterday was the revelation that Russia might not have pulled back its troops from the Ukrainian border, other developments added to the upward track. In addition to the highest ever UK electricity auction the market also saw a forecast of ongoing cold in the eastern US into the month of March. However, cold on the East Coast is offset by a cooling-off on the West Coast of the US. In a development that could be considered bullish or bearish, the Russians have indicated they have contingency plans to ship oil and gas around any sanctions that could be levied by the West. Furthermore, the Russians have announced increased gas shipments to countries like Italy, Hungary, and China and that suggests they are planning contingencies because they are planning on attacking.
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