Written Commentary
CRUDE OIL
While the crude oil market has not made a new contract high as of this writing, the trend is clearly pointing up without regard to overbought technical signals. There is not a single issue serving to lift crude oil prices. Fear that demand is outpacing supply and a weaker dollar is providing the brunt of this morning’s strength. Another key supporter of strength today in crude oil is the relief that a large Chinese real estate development company has managed to make a debt payment. Yet another bullish development was noted yesterday with OPEC plus output “over complying” with the production restraint agreement.
We are surprised that the gasoline market has not forged a new contract high this morning as Canadian refinery maintenance has reduced US product output while international users are increasing their demand for energy products because of surging natural gas prices. The reduction in North American refinery output resulted from a Canadian refinery and that is expected to tighten supplies next month. Yet another supportive supply-side development was seen from a 9-week low in US gasoline imports from Europe.
NATURAL GAS
The natural gas market looks to be on the defensive despite a broad-based risk on vibe throughout physical commodity markets and signs of strength in petroleum markets. December natural gas started the new trading week with a gap lower opening and a 3 1/2 week low for a second sizable daily loss in a row. Reports that Russia is preparing the Nord Stream 2 pipeline for a start of operations weighed on natural gas prices as that additional gas should help to relieve the tight near-term supply situation for natural gas in western Europe.
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