Written Commentary
CRUDE OIL
We suspect the temporary spike down violation of $55.00 in February crude oil was the result of overzealous hopes for a peace deal between Russia and Ukraine. However, Putin continues to make very aggressive demands to retain land gained plus additional territory to ensure a security zone and that could be a bridge too far for the Ukrainians. Furthermore, the technical picture is significantly overdone on the downside with the most recent COT report (delayed and from 11/25/2025) managed Money positioning shifting back into a net short above 28,000 contracts and to the second largest managed Money short in history! In fact, with February crude oil into yesterday’s low down nearly $3.00 from the last positioning report (11/25) the market likely remains historically oversold. On the other hand, with the Trump administration announcing a blockade on Venezuelan oil tankers and applying additional pressure on Russia with the threat of additional sanctions, the oil market has temporarily shifted from longer term glut fears to near-term supply tightening concerns.
PRODUCTS
Despite having the least supportive fundamental set up, the gasoline market has also rebounded aggressively this morning off the Venezuelan blockade and from threats of more aggressive sanctions against Russia.
NATURAL GAS
Like the petroleum markets the natural gas futures are significantly oversold with a managed money short of 65,361 contracts which is overstated given the markets decline of $0.54 since that report was released (11/25)! However, US temperatures have moderated from extreme early season cold and look to stay near normal into year-end which is a shift from recent forecasts. On the other hand, a moderate portion of the late November and early December rally might have overstated the net impact of a persistent winter polar vortex breakdown. However, it should be noted that US EIA natural gas in storage is minimally below year ago levels but are 2.8% above five-year average storage levels.
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