Written Commentary
CRUDE OIL
Apparently, the energy markets are not concerned with headlines this morning suggesting that the Russian Foreign Minister is concerned about increased shelling in eastern Ukraine as that seems like the beginning of a false flag operation. Furthermore, a US diplomat was expelled from the US Embassy in Moscow which is a sign of deteriorating tensions between the two powerhouses. Some traders think Russia will wait for the end of the Olympics (Sunday) before attacking to avoid a very visible backlash.
Like the crude oil market, the gasoline market spent most of the Thursday trade in the lower half of the Wednesday trade in a fashion that emboldened the bear camp. Furthermore, the April gasoline contract this morning has extended on the downside which has accentuated the bearish chart set up. A logical near-term downside targeting point is seen at $2.7150. While an indirect impact on the products, talk of progress on the Iranian nuclear deal negotiations applied broad-based pressure throughout the energy complex.
NATURAL GAS
While the natural gas market flared higher yesterday and, in the process, forged a 9 day high, the market failed to hold that rally possibly because of a smaller than expected weekly withdrawal of gas from US storage. However, despite the smaller draw, the deficit to the 5-year average US storage level expanded to 11.3% which is the tightest supply since October when the market began to factor in extreme winter tightness. Furthermore, reports have UK wholesale electricity cost jumping by 5% yesterday, Europe has become the top export destination for US LNG and a shooting war in the Ukraine would be a major disruption to gas flows throughout Europe.
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