Written Commentary
CRUDE OIL
We see the energy markets at a critical juncture with the Ukraine situation potentially sparking a major supply threat in the event Russian energy exports are restricted by the global community. The bull camp should also be emboldened by news that a missile attack on the UAE was seen overnight even if that attack was foiled with the UAE intercepting and destroying two ballistic missiles fired from Yemen.
As opposed to the crude oil market where the hedge funds are starting to reduce their net long, RBOB hedge funds have built their long bets to the highest level in one year. In our opinion, US economics have slowed, global economic readings have slowed, and high pump prices should be tempering demand. In addition to potentially bearish demand conditions ahead, the supply-side of the equation in gasoline shifted negative last week with the EIA report registering a year-over-year stocks surplus for the first time in several quarters.
NATURAL GAS
With a weekend story from the Wall Street Journal suggesting Europe will be handcuffed in dealing with Russia (because of its reliance on Russian natural gas), we suspect Russia will remain confident in their ability to achieve some of their goals in the region.
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