Written Commentary
CRUDE OIL
While the big range up move yesterday was largely the result of an official EU agreement to ban all Russian oil within 6 months, a portion of this week’s gains were the result of very significant upside leadership from product prices, dollar weakness, an equity market recovery, and a measure of weakness in the US dollar. Furthermore, despite the markets fully expecting an incrementally enforced ban throughout the rest of the year, prices jumped because more and more instances of companies shunning Russian shipments are being rejected and each passing week sees lower overall net global supply of accessible supply.
Bull control in the gasoline market has extended into today’s session with a higher high and the overnight high approaching the contract high at $3.70. In retrospect, the range up higher high for the move in RBOB yesterday was justified by the weekly EIA report. In addition to a larger than expected weekly draw in EIA gasoline stocks, the annual RBOB deficit to year ago levels expanded and implied demand continues to track historical patterns despite extremely high prices. EIA gasoline stocks fell 2.230 million barrels and are 7.236 million barrels below last year and 10.475 million below the five-year average.
NATURAL GAS
This week’s flow of positive fundamental demand news is partially confirmed from Germany, Poland, and many other countries continue to rush to fill storage to capacity. With a portion of the US expected to see cold temperatures week and Texas warning of significant cooling demand ahead, US weather provides the bull camp with confidence today. Since the market did not expect the EU to conclude the banning of Russian gas exports to European Union members, the lack of upside action on natural gas was minimal yesterday.
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