Written Commentary
CRUDE OIL
Fundamentally, the market has been undermined by the large, coordinated US and IEA strategic oil release schedule. However, supply tightness fears could return soon following analysis suggesting the last of grandfathered (transactions enacted before sanctions were implemented) Russian supply cargoes will reach ports this week.
Like the crude oil market, the May RBOB contract has respected psychological/consolidation low support at $3.00. In our opinion, the gasoline market will be the most vulnerable section of the petroleum market from a supply perspective, with the US refinery operating rate lofty at 92.5%. In other words, US refiners are ramping up product supply flow and it will become a race between higher supply and gradually increasing seasonal demand. Unfortunately for the bull camp supply is likely to climb higher in the short term, while demand abates after the upcoming holiday.
NATURAL GAS
With the natural gas market forging a fresh contract high Friday and falling back significantly from that pulse up move, the bear camp probably has a moderate technical edge to start the new trading week. However, while cold US weather has boosted late season gas consumption (potentially producing another withdraw in this week’s storage report) the trade is ratcheting down demand because of additional Chinese demand fears in the wake of another city lockdown.
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