Written Commentary
CRUDE OIL
Certainly, the Ukraine situation will remain a dominant force for determining energy prices, but US Fed dialogue early today and expectations for OPEC plus to confirm a modest increase in output next month, could provide temporary setbacks from the overnight high. In the end, seeing crude oil storage in Europe declining 11% on the week, Canada moving to ban Russian crude oil, shipping delays at some Russian ports and the strongest ever term pricing in futures spreads, there are many bullish forces operating in the marketplace.
Clearly, the factoring of a disruption of Russian oil to the world market is lifting product prices but the importance of Russian supply of products to the world market cannot be understated at present. If there is a negative for the gasoline market this morning it is the potential for surging prices to reduce retail demand. However, the Gasoline market has surged to new contract highs despite ideas that refiners are managing to continue profitable operations because product prices have risen in unison with crude oil prices.
NATURAL GAS:
Relatively speaking, the gains in the natural gas market were very modest versus the petroleum complex yesterday but we now see some catch-up action. In a bullish psychological development, the owner of the Nord Stream 2 pipeline might be forced into bankruptcy as that could put all pipeline activity under scrutiny. With cold weather projected for Europe and the US ahead, Russian supply to Europe becomes extremely critical and with Russia reportedly pushing some gas through the Yamal pipeline, a stop in transport of that gas would felt instantly by UK and European buyers. In a positive development for the US gas industry, the IEA has advised Europe to reduce its dependence on gas and increase its interest in LNG. The US has already become the number one exporter of LNG and given signs of lower terminal supply, one could conclude that supply is being shipped out quickly to Europe and Asia.
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