Written Commentary
NATURAL GAS
Clearly, the charts continue to show ongoing bullish action with a bullish fundamental view apparently rising of concern of a disruption of Russian gas flowing through Ukrainian pipelines. As we indicated earlier this week Russian targeting of Ukrainian power infrastructure could easily disrupt gas flows and create shortages in Europe which in turn may be sparking aggressive seasonal inventory recharge efforts. Unlike the petroleum markets, the natural gas charts became more supportive with prices breaking out and reaching the highest level since early March yesterday. In our opinion, a ring of above normal temperatures in the outer third of the Western, southwestern, Gulf Coast and southeastern coasts have extended expectations for above normal cooling degree days. This week’s Reuters poll pegs EIA natural gas in storage to increase by 72 BCF to as much as 80 BCF.
CRUDE OIL
With the energy markets not benefiting from the ability of financial markets (particularly interest rates in equities) with to discount negative macroeconomic readings the trade is not interested in signs the outside market environment for favorable energy demand could remain in place. Furthermore, the trade is not supported by a surprisingly large decline in API crude oil stocks yesterday afternoon of 3.1 million barrels. However, this week’s Reuters poll projects EIA crude oil stocks to fall by only 500,000 barrels and apparently to rekindle bullishness toward crude oil requires significant evidence. In fact, the potential loss of supply from wildfires around Canadian oil sands has also been discounted despite news the wildfires have already closed/suspended some Canadian national railway routes. On the other hand, the bear camp is not without arguments as European crude in storage increased by 7.8% on the week and the International Energy Agency overnight reduced its global oil demand outlook by 140,000 barrels per day versus last month.
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