Written Commentary
CRUDE OIL
Once again, the crude oil market showed significant bullish resiliency by rejecting a hard washout yesterday morning and at times trading $6 above the early low. Obviously, crude oil prices bounced aggressively in the wake of a patently supportive wave of declines in critical EIA inventory readings. In fact, the massive decline of 5 million barrels in crude oil stocks in the face of ongoing heavy SPR flow suggest demand remains strong and/or production is failing to rebuild supply. However, the potential for Saudi Arabia to increase its output this summer tempers the idea that global supply will “continue to decline”. Furthermore, India and Kazakhstan are both pressuring OPEC plus to produce more oil.
Even though the gasoline market fell sharply yesterday morning, the sharp recovery into fresh record highs should embolden the bull camp again and discourage sellers. While the net decline in EIA gasoline stocks was not overly significant, stocks did declined and expanded their deficit to year ago levels to 14.9 million barrels! On the other hand, the EIA pegged US gasoline demand over the last 4 weeks to have declined by 3.1% versus year ago levels and the trade was presented with a weekly increase in Amsterdam, Rotterdam, and Antwerp gasoline stocks. While the net spec and fund long in gasoline is likely exploding, the most recent reading suggests the market had significant buying capacity into this week’s trade.
NATURAL GAS
The fundamental bias in natural gas remains bullish with expectations of record Texas consumption net week (due to record cooling demand) and there is support from word that the US administration is considering gas windfall profit taxes. Certainly, weakness in US natural gas spot prices on a week over week basis is bearish, but that impact is offset by higher international gas prices. On the other hand, European gas is set to post a 4th weekly decline as significant tanker movement toward the EU has taken the speculative edge off the market.
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