Written Commentary
CRUDE OIL
With the energy markets continuing to rise in the face of deteriorating global economic conditions and a strong probability of an aggressive US rate hike next week, the bull camp clearly has capacity. However, the intensification of the fighting with both parties undertaking offensives in the war continues to push the potential for a complete EU ban. Apparently, favorable Petro China earnings offset lower Chinese refinery activity as the lower refinery operating activity earlier this week prompted chatter of significant declines in Chinese energy demand.
As indicated already, fundamentals in the diesel market are the tide that lifts all petroleum boats. Furthermore, European weekly gasoline stocks at the ARA hub declined on the week and sharply lower Russian refinery activity could crimp product exports even more. Furthermore, reports that China will “keep gasoline and diesel at home” combined with ongoing efforts to do the same with diesel and palm oil in Indonesia and Malaysia suggest a new realm of tightening supply is surfacing.
NATURAL GAS
While the gas market was probably aware that US gas production hit a record high last year, the trade is already assuming that international interest will in the end will take all the US export capacity will allow. Keep in mind, that a complete ban of Russian gas has not taken place yet, a large portion of Europe has not actually halted its use, there appears to be increased debate on a ban), and Russia appears to have turned on some supply flow again.
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