Bullish Momentum Continues to Dominate
As February crude oil nears its contract high of $82.13, the overnight energy related headlines are mostly bearish. In addition to a weekly rise in European crude oil storage of 4.5%, the crude oil market is also discounting news that US fracking activity is ramping up sharply which in turn should boost US production in the future. In yet another bearish development China has apparently implemented rules to reduce refinery activity to clear up the air head of the Olympics, which in turn should reduce the need for Chinese crude oil imports.
Like the crude oil market, the gasoline market has also discounted patently bearish fundamental news overnight and continues to rally aggressively. In fact, the API overnight pegged gasoline stocks to have increased by a whopping 10.8 million barrels and that follows a 10.1-million-barrel build in EIA gasoline stocks last week.
While we suspect that natural gas prices are being lifted by the slipstream of the sharp rise in petroleum prices the primary lift is likely ongoing Russian restrictions on gas flows to Europe. Reports from Russia that 2021 Russian gas consumption remained well below 2020 gas consumption levels adds credence to the view that Russia is using gas as a political weapon. According to recent reports European gas storage is 51% of capacity compared to a 5-year average of 67% for this time of the year.
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