Written Commentary
CRUDE OIL
Obviously, the Russian/Ukraine situation remains bearish to energy prices as Russian supplies are less likely to be blocked especially if further de-escalation is seen. In fresh bearish developments overnight crude oil in storage at the key European hub increased by 0.7% on a weekly basis and Iranian officials have suggested a deal is near if the West is rational. However, forecasts of $100 and $125 oil continue to surface, prompt Brent crude oil spreads have reached the highest level in years and there are reports of improving travel. Cushioning April crude oil above the $90.00 level are reports that the US has yet to “verify” the Russian troop pullback.
While there are attempts to temporarily suspend the US national gasoline tax and various states have promised to reduce their taxes, retail gasoline prices saw a 1.3% gain over the prior week with all regions reporting prices reaching the highest levels in 12 months. Therefore, some retrenchment in demand could be a logical conclusion. However, overnight reports of increased traffic congestion in Paris and signs of increased travel interest suggest consumers are not price sensitive yet. This week’s Reuters poll projects gasoline stocks to increase by 600,000 barrels at the same time the survey projects a 0.5% decline in the US refinery operating rate.
NATURAL GAS
The amount of bullish fundamental news flowing for natural gas over the last 2 days has been very significant. In addition to reports that US LNG has become profitable into Europe, combined with reports that Asian might begin to “compete” with Europe for supply, gives the bull camp ongoing confidence. While not a large amount of supply is involved the press overnight is reporting multiple LNG tankers arriving at UK and European ports and part of that gas is likely coming from the US.
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