Written Commentary
CRUDE OIL
Given the markets lack of significant upside extension following the weekend Iranian drone attack of Israel is disappointing to the bull camp. Like several other physical commodity markets, the crude oil market ranged sharply higher early Friday and promptly fell back $2.00 from the early high in a fashion suggesting the markets may have over factored Iranian retaliation. However, with Iran launching direct drone attacks on Israel, one could consider the war has expanded as feared. While Chinese January through March crude oil imports gained 0.7%, the trade was probably expecting larger imports into China. A fresh limiting development from overnight is an 11% increase in crude oil in global floating storage with that report presenting another massive buildup in US Gulf Coast crude oil supplies (+242%). Unfortunately for the bull camp, US oil inventories appear to be in a building cycle with three straight weeks of inflow to EIA crude oil inventories totaling 12 million barrels and given a narrowing the annual inventory deficit from 36 million barrels on March 15th to only 13 million barrels as of April 5th.
NATURAL GAS
With the June natural gas contract posting a nine-day low on Friday, the market could be poised to retest contract lows at $1.928. In retrospect, the weekly injection report showed a reading near the upper end of the injections estimates which could be seen as the end of the withdrawal season and the beginning of the injection season. While not a major decline, inventories relative to five-year average levels declined minimally but overall remained a very negative influence with supplies still 38.4% above 5-year average levels. However, with the market sliding after the release of the COT positioning report (down nine cents into Friday’s low) the net spec and fund short is building the largest of the last four weeks range.
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