Written Commentary
CRUDE OIL
Despite a Russian missile attack of a Ukrainian training facility close to the Polish border over the weekend, the market forged a 3-day low and looks destined to probe under $100 later today. Apparently, the trade is concerned there could be “progress in the talks” today but we seriously doubt that outcome. However, there are reports overnight that Russian oil companies are offering very favorable terms like financing and discounted prices with the Chinese potentially helping the Russians with purchases. While the energy markets have adopted supply-side fears from the ongoing prospect of more boycotts of Russian oil, the trade might be walking a thin line with respect to “energy demand destruction” from high pricing and from fears of a global recession from the war.
With political pressure mounting on the US administration from surging retail gasoline prices, we suspect the Biden Administration and Congressional Democrats will begin to discuss a pause in gasoline/road taxes. However, slashing the price from historic highs to slightly less than historic highs might not result in gasoline prices continuing last week’s washout.
NATURAL GAS
The natural gas market appears to be shifting bearish after missing the significant rallies seen in petroleum markets from the Western embargo of Russian energy supplies. Adding into the negative bias this morning are reports that Russian gas continues to flow on the Yamal-Europe pipeline, and we suspect that flow will continue if payment is received. In retrospect, the Yamal pipeline was shut down for 2 months with supplies from that pipeline system ultimately destined for Germany which is heavily dependent on Russia gas. Modest negatives were also seen this morning from warmer than normal temperatures in the Midwest and East Coast of the US and from sliding European cash prices.
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