Written Commentary
CRUDE OIL
The crude oil market is in a fickle position with residual global demand fears hanging in the background at the same time evidence of further isolating of Russian supply builds. In fact, overnight the EU warned its members against paying for Russian oil in rubles and Germany indicated they are in favor of a total but gradual implementation of a ban of Russian energy. The markets certainly see demand fears moderated by a 16-hour recovery in global equities, but military activity appears to be escalating which in turn will likely erode any improvement in energy demand hopes. While OPEC indicated they will likely continue to incrementally raise production in their May 5th meeting (they expect to add 432,000 barrels per day) the trade is justifiably doubtful of their ability to provide that much oil supply.
While we see gasoline garnering a partial leadership role within the energy complex, gasoline prices are climbing a wall of worry of slower global gasoline demand, partly from consumer disdain for high prices but also from growing prospects of a serious downtick in Chinese fuel consumption because of lockdowns. In fact, as mentioned already, satellite analysis has clearly showed a decline in activity/movement in China with port activity also notably slower.
NATURAL GAS
Even though natural gas prices failed to show instant notable upside action following the revelation of a halt in Russian gas shipments, the trade has caught up and prices appear to be on a track to regain $7.50. However, overnight reports were that gas flows from Germany to Poland via the Yamal-Europe pipeline picked up again, but that situation is highly variable. While EU official comments might be posturing, suggestions that they have adequate near-term supply could signal European countries have now stored supply in every available space.
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