Written Commentary
CRUDE OIL
We are surprised in the magnitude of initial gains in crude oil this morning as the trade was presented with a widely expected full EU ban of Russian crude oil by the “end of the year”. Perhaps the bull camp was emboldened by the view that incremental enforcement of a ban will progressively reduce exports from Russia. The Russians did not have an immediate response to the EU decision to ban their supply and instead pointed out the economic pain from even higher prices because of the ban.
The charts in gasoline continue to point upward, the trade sees full capacity refinery activity at many large refining companies as a sign of strong instead of a supply side limit for prices. So far, we expect global product supplies to make only incremental gains before seasonal demand picks up. The API survey said that US gasoline stocks fell by 4.500 million barrels which was a much larger decline than market expectations.
NATURAL GAS
Clearly, seeing natural gas start the week in a very strong upward track suggest the bull camp is in control even though the EU did not address a ban of Russian gas. However, switching from Russian gas continues to present in the headlines in a sign that supply is falling. Estimates from Bloomberg suggests Russian gas exports will decrease by 20-bcf per year next year! In addition to evidence of surging US LNG exports, the markets also saw reports yesterday that physical gas flows on the Yamal-Europe pipeline halted.
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