Written Commentary
CRUDE OIL
With growing fears of a financial contagion in China, returning Gulf production, a surging US dollar and a 500 point plus initial decline in Dow futures, the range down failure in the crude oil market this morning is justified. While we suspect the Chinese government will step into prevent a chain reaction of defaults from their 2nd largest financial real estate entity, energy demand fears are likely to be factored into prices early this week.
As in the crude oil market, the gasoline market is under significant pressure from demand fears originating from the potential for a financial contagion event in China. Adding into the negative track in gasoline are reports that Chinese shipments of September gasoline to the US increased from 435,000 tons to 645,000 tons in the most recent weekly readings.
NATURAL GAS
With surging European gas prices creeping into mainstream headline coverage, Norway stepping up shipments to Europe and UK energy firms seeking government help to solve the gas crisis, it is possible that bullish sentiment reached a zenith last week. Furthermore, with an initial gap down opening this week, adverse weather not expected to impact US production or transportation areas in the near term, a sharply higher dollar, and moderating US above normal temperature readings, the path of least resistance is pointing down.
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