Written Commentary
CRUDE OIL
We suspect several developments have provided oil with an early upside breakout to the highest level since January 29th. News that Yemeni rebels have continued to attack ships, news OPEC+ will extend oil cuts into the second quarter, and the very aggressive Chinese move to support their property sector is emboldening the bull camp. However, extending production cuts might only discourage sellers and might not prompt fresh buying. However, the bull camp should draft support from expanding hedge fund long interest in Brent and from news that this year’s Chinese holiday road traffic was the highest of the pandemic era. In fact, the markets are also drafting support from evidence that Chinese vacationers are flocking to areas in Southeast Asia and from very upbeat forecasts for global passenger jet fuel demand this week. In yet another supportive weekend development Iraq has indicated it will improve its compliance with OPEC+ production cuts after evidence the country produced 190,000 barrels more than their quota last month. Last week the US rig count declined by two with the overall oil and gas rig operating countdown last year by 20%. The bull camp in crude should be emboldened by the fact that WTI net spec and fund long remains near 12-year lows.
NATURAL GAS
While the technical picture for natural gas improved slightly with the early sharp rejection of new contract lows, we suspect cooler temperatures will have a very limited if any sustained impact on prices. However, given the net spec and fund short in natural gas is nearing the largest level since May of last year, it could become increasingly more difficult to press prices lower.
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