Written Commentary
CRUDE OIL
The residual bearish impact from global strategic supply flow, Chinese demand fears, a strong dollar, higher interest rates and reports of a new Covid variant leave the bear camp with an edge from big picture issues. In fact, Brent crude time spreads overnight were reportedly at the weakest level this year and there are reports that funds are exiting the long side of crude oil. In minimally supportive developments overnight, India has reportedly dropped Russian Urals oil from its most recent tender, lockdown restrictions in Shanghai have moderated and there were unverified reports of Russia using chemical weapons against Ukraine.
While we see the charts definitively negative in May gasoline, the $3.00 level is becoming an extremely critical pivot point junction. As indicated in crude oil coverage today, expectations for the US refinery operating rate call for a reading approaching 93% and that is limiting of future prices. Another limiting force for gasoline is reports that the Biden administration will alter policy to boost the use of ethanol this summer, which is obviously an effort to reduce prices.
NATURAL GAS
Despite signs that ultra-high prices has tempered Chinese buying and reports of a significant declines in spots/cash trading volume, the May natural gas contract forged another new high for the move overnight. Perhaps expectations for Russian supply flow through Ukraine to declined today inspired the jump in European prices and that in turn has lifted US futures prices. In a longer-term limiting development Germany indicates their gas reserves can last until late summer.
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