Written Commentary
CRUDE OIL
Despite the June crude oil contract managing to reject a fresh new low for the move it did fail at what appeared to be a double low from the prior 2 trading sessions. However, demand expectations continue to soften, evidence of significant Russian oil flows to Europe produce ongoing supply pressure and Exxon has added to negative supply views with increased quarterly production. Additive negatives for the trade to digest today are increased US company purchases of Venezuelan oil and a higher US dollar. Fortunately for the bull camp and very unfortunately for future consumption of oil by US consumers the US Supreme Court has rejected a request by major oil companies to shift climate change lawsuits to federal courts. Clearly, the ESG movement is poised to spark another inflationary bulge by attempting to replace petroleum before it is feasible! Slackening energy demand expectations remain in place, and at present there is a very small number of bullish supply-side arguments! According to the Iranian Navy, the tanker hit an Iranian ship prompting the Iranian Revolutionary guard to take control of the vessel. The tanker was recently loaded with 1 million barrels of oil in the neutral Saudi – Kuwait zone and is registered as a Marshall Island’s flagged vessel. However, as of this writing it is not clear if the US will take the vessel back by force especially if the vessel makes to Iranian coastal waters.
NATURAL GAS
Surprisingly, the natural gas market managed to reject a downside extension yesterday despite a weekly EIA injection report generally perceived as bearish by the trade. The weekly natural gas storage report showed an injection of 79 bcf. While the French and Europeans continue to buy to refill, strategic storage, there appears to have been a loss of buying urgency with natural gas prices tracking within a range over the last 5-weeks. However, residual pockets of below normal temperatures are expected to dissipate on both sides of the Atlantic giving way to normal seasonal warming and we expect heating demand to decline and for US EIA working gas in storage levels to rise normally. On the other hand, the bull camp continues to cling to evidence of very strong US gas exports, with several services predicting a 2nd straight record high export reading for April.
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