Written Commentary
CRUDE OIL
Chatter in the oil markets this morning points to a possible loss of upside momentum in oil prices because of demand fears arising from very hawkish global interest rate sentiment. While oil flowing from the SPR has been factored by the trade that supply flow probably tempers bullish resolve. In fact, overnight a US cargo of SPR oil left its US port enroute to Europe.
With the upside breakout in gasoline yesterday more significant than the upside breakout seen in crude oil, the RBOB market might be more vulnerable to technical back and fill action today than crude oil. The trade expects gasoline stocks in this week’s EIA report to decline and given a refinery operating rate of only 90% last week, we concur with the expectation of tightening gasoline stocks.
NATURAL GAS
With a gap higher opening to start the trading week, the bull camp clearly benefited from a list of bullish factors. While cold temperatures fueled June natural gas to new contract highs yesterday, we think prices were also lifted by technical short covering from a large net spec and fund short. The most recent COT positioning report for natural gas as of April 12th showed a net spec and fund short of 88,962 contracts. On the other hand, several weather forecasting entities peg heating degree days in portions of the US to run significantly above normal directly ahead and that should help cushion prices against a needed corrective balancing setback.
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