Written Commentary
CRUDE OIL
With a higher high in May crude oil prices early today, the markets appear to be embracing analyst forecasts of a possible 5 million barrel per day global shortage of oil. Obviously, reduced Russian supply makes up a significant portion of that global shortfall, but a breakdown in Iranian nuclear talks turns some buyers away from purchasing Iranian oil. As of last month, Iran was pumping 1.2 million barrels per day less oil than in 2018. Apparently, the coordinated release of strategic petroleum reserves has had little lasting impact on prices, perhaps because fresh EU sanctions are expected to keep Russian supply under an ever-tightening grip.
According to the IEA, demand for gasoline is expected to soften because of surging retail pump prices and that appears to have held back prices today. As indicated already, US gasoline consulting services are projecting a reduction in US gasoline demand because of ultra-high prices, but that is partially offset by chatter of a significant jump in jet fuel consumption from a major jump in European air travel.
NATURAL GAS
Even though Russia has continued to allow Western gas deliveries into Europe, the natural gas market yesterday forged a fresh contract high again overnight. In our opinion, news that Germany was finally moving to sanction Russia and seek gas diversification from Russia, means portions of Europe are reacting off reports of mass killings in the Ukraine. The market should also draft ongoing support from cold in a large portion of the US, higher than normal cooling demand from the East Coast of the US and from news that LNG in floating storage declined by 41% over the last week.
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