Written Commentary
CRUDE OIL
With the November crude oil carving out a 3-day consolidation low around $76.42, the Bank of England promising unlimited bond purchases to soothe anxiety and Russia suggesting OPEC+ will need to reduce output by 1 million barrels per day to support prices, a temporary pause in the downtrend might be seen. However, API crude oil stocks yesterday posted a much larger than expected inflow of 4.2 million barrels, the dollar remains in a definitive uptrend, fears of global recession from surging interest rates are widespread and energy demand destruction is becoming a fixture in the market.
Gasoline prices managed to post a 3 day high this morning despite presidential demands of lower gasoline prices. Obviously, the product markets continue to face significant demand destruction threats as the Federal Reserve continues its battle to anchor inflation expectations at the expense of economic activity. Certainly, the hurricane in the Gulf of Mexico has shuttered offshore activity but given the track of the storm US refinery activity is not likely to be disrupted. Therefore, pre-existing bearish supply and demand fundamentals should eventually prevail and in turn extend the June through present downtrend.
NATURAL GAS
Natural gas prices are close to falling below their 200-day moving average for the first time and need to find much more supply/demand support to regain upside momentum. November natural gas found early strength yesterday but fell back under pressure as it finished Tuesday’s trading with a moderate loss. While the natural gas market was initially supported by the Nord Stream pipeline leaks and by Russia’s sharp reduction of their gas exports to western Europe the market has faltered. Euro zone nations are well ahead of their pre-winter storage build targets, and that may diminish demand for US LNG exports late this year.
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