Written Commentary
CRUDE OIL
While there are reports that Russia continues to “struggle” to find buyers for its oil that is offset by news that China will continue to buy oil from Russia. In 2021 Chinese crude oil imports averaged 10.2 million barrels per day which provides Russia with a significant financial “bridge” over the threat of economic slowing from global sanctions. In a minimally supportive overnight development, crude oil storage in the ARA hub declined by 3.6% and tanker rates continue to surge with some players positioning for $300 Brent crude oil this summer.
Like the crude market, the gasoline market yesterday failed to take out the previous day’s high in a reaction that has many doubting the bull case. However, reports that Chinese domestic oil refiners will direct their production of products internally should tighten the world gasoline market and more significantly the world diesel market.
NATURAL GAS
At least for now, the Russians have not decided to shut off the gas flow to Europe following additional Western sanctions. Further dampening natural gas prices this morning is news that Russia has offered its first LNG shipment to Asia, where China has indicated, they will continue to buy gas from Russia. Add in warmer European temperatures which are expanding into the central euro zone and adequate wind and solar power, the sharp downward thrust in prices this morning is justified by fundamentals. Another negative for gas is seen from China ramping up coal production to lower electric generating costs.
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