Written Commentary
CRUDE OIL
Demand fundamentals have improved consistently in the month of April, with reports that Chinese bound supertankers have reached the highest levels in over two years combining with very strong Indian fuel consumption and early chatter on strong summer driving demand in the US and Europe. Furthermore, solid fundamental demand evidence is partially confirmed by a 17% decline last week in global floating Crude storage. However, crude oil prices today are not showing a favorable reaction to a positive overall environment. Perhaps the market remains overbought and in need of more sideways consolidation after the extremely strong start to the month of April. It should be noted that global crack margins have narrowed potentially signaling recent crude price gains have discouraged refiner buying.
PRODUCT MARKETS
While the bias in crude oil prices looks to remain up and US gasoline supply and demand fundamentals are the most supportive in the petroleum complex, the market is amid a seasonal demand lull with Russia and China currently in aggressive fuel export modes. Nonetheless, as can be verified in our website charts from weekly EIA data, gasoline seasonal demand should rise consistently over the next several months. Furthermore, with EIA gasoline stocks at a 10.8-million-barrel deficit to year ago levels and recent implied gasoline demand readings showing summer like consumption gasoline should hold fundamental support near last week’s lows ($2.7088). Furthermore, gasoline technical signals are not overbought yet with the most recent positioning report showing a very modest net long despite the market’s explosion over the last 30 days.
NATURAL GAS
The bear camp is likely surprised with this morning’s higher high given news that Ukraine is beginning to refill underground storage as that news verifies Russian supply flow is meeting Western Europe continental demand. We suspect gas is benefiting from the presidential move to allow Alaskan gas exports and to a lesser degree from a slight improvement in global economic psychology. Furthermore, given the strong rejection of the new low Friday and the slow declines recently, the bear camp appears to be losing control. In fact, the lower lows at the end of the week saw volume and open interest decline.
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