Written Commentary
CRUDE OIL
In a somewhat surprising reaction the energy markets have held up relatively well this morning in the face of surging omicron infection numbers which suggest the fear of slumping demand is being discounted. In fact, OPEC+ is unconcerned about the prospects of a downtick in demand as they are expected to go ahead with a planned February output increase of 400,000 barrels per day in their meeting Tuesday.
With the passage of the most critical driving season of the calendar in the northern hemisphere the onus is on the bull camp to shut off and reverse the major washout from last Friday. In a minimally supportive development overnight Asian gasoline cracks strengthened. Furthermore, with over 15,000 flights canceled in the US from the winter storm and short staffing, we suspect demand over the recent holidays surged. In retrospect, gasoline demand picked up last week with an implied gasoline demand reading of 9.72 million barrels per day which probably leads to another strong implied demand reading from the EIA this week.
NATURAL GAS
Like the regular petroleum complex markets, the natural gas market enters the week oversold from a massive 2-day washout last week. Underpinning prices to start the week is the fact that Russian gas flows continue to flow east for the 14th straight day.
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