Written Commentary
CRUDE OIL
Several fundamental developments increase the odds that the Wednesday low around the psychological $100.00 level is an intermediate low. In addition to another country cutting down energy supply flow from Russia, overall EU discussions on a ban appear to be building, API crude oil stocks fell significantly this week and the prospect of severe global jet fuel supply shortages this summer should support refinery activity. In fact, some Asian gasoline crack margins hit a record level and all four major API product inventory readings remain in deficit to year ago levels.
Even though EIA gasoline stocks remain at a 2.6-million-barrel deficit to year ago levels, the ULSD market remains the leadership market in the product sector. Overnight reports pegged softer UK road fuel demand but stronger French road fuel demand. In a negative supply side development, Indian refinery activity last month posted a 6.4% year-over-year increase.
NATURAL GAS
Obviously, the bull camp is seriously threatened by the 5% plus decline in natural gas prices yesterday. The trade lays blame on the washout yesterday off warmer US temperatures and a lack of notable change in Russian gas flows to the West. Some traders suggest that natural gas prices hit a natural barrier at the $8.00 level, with US export flow to Europe possibly reaching terminal and pipeline capacities. In other words, exports from the US look to remain very strong but are unlikely to expand further.
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