Written Commentary
CRUDE OIL
The crude oil market lost its upside bid last week and appears to have forged a top at the $80.00 level. In our opinion, the bull camp should worry about demand again as a lengthening string of soft US data has become a trend and economic news from China is not definitively upbeat yet. However, prices could find some support from a tightening of US oil supplies because of weakness in the dollar (increased exports) and from the spooling up of US refinery activity after extended maintenance left nearly 20% of US refinery capacity off-line for the last five weeks. Fortunately for the bull camp, the recent jump in the refinery operating rate (from 80.6% on February 9th, to last week’s 84.9%) should improve demand for prompt crude.
PRODUCT MARKETS
Like the crude oil market, the gasoline market damaged its charts with a lower low this morning and faces bearish fundamental and technical influences to start this week. In addition to clear signs the US is ramping up its refinery activity (from 80.6% on February 9th to 84.9% last week) creating a rising supply environment some may question US demand given an obvious trend of softening US economic data. Unlike the crude oil market, the gasoline net spec and fund long position is relatively lofty (30,000 contracts above the last two years lows) potentially allowing for a retest of a late February double low zone beginning at $2.4930.
NATURAL GAS
While overnight reports of strength in Asian LNG prices provide some support which in turn solidifies charts support around $1.80, fears of slower US exports from terminal problems should keep up the pressure on prices from rising US supplies. In other words, with US supplies remaining burdensome even with record or full capacity exports, demand remains a major problem for the bull camp. With the natural gas market last week seemingly coming to its senses after several weeks of what was more than likely long term short covering buying, the trade now looks to be seeking a lower value zone.
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