Written Commentary
CRUDE OIL
Crude oil prices have forged 5-day highs this morning despite a very large 7.7-million-barrel API crude oil stocks increase, comments from Putin suggesting Russia can “grow” consumption of Russian oil to users who “need” supply and in the face of a 1.5% weekly rise in ARA crude oil storage. However, the Russian president also promised to continue the war with suggestions that talks with Ukraine were “at a dead end”. Other forces in the bull’s favor were reports overnight that the amount of Russian oil shut in by sanctions will reach 3 million barrels per day in May, news that Nigerian oil production continued to fall sharply last month, news that Kazakhstan production would fall due to maintenance in June and because additional major oil companies are halting energy trade with Russia.
While a dock fire in San Francisco over the last weekend threatened production at a Valero refinery, the primary source of lift for gasoline prices from this week’s low is positive leadership from crude oil. It is also likely that a portion of today’s gains are the result of a 5-million-barrel decline in API gasoline stocks and from Indian growing disdain for high price offers from Russia. Furthermore, the gasoline market largely shrugged off bearish news that the Biden Administration was moving to relax US refinery exemptions on the amount of ethanol used in fuel, which in turn would promote increased ethanol use as a mechanism to drop prices this summer.
NATURAL GAS
While the May natural gas contract was unable to hold large gains yesterday, the market spent most of the Tuesday trade in positive territory. The bull camp in natural gas was supported by a surprisingly strong Chinese “oil” import tally for March and is also supported this morning by reports that Russian gas flow to Europe through Ukraine is projected to decline even more today. Unfortunately for the bull camp estimates overnight have predicted that Covid issues are a threat to 75% of China’s LNG consumption.
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