Written Commentary
CRUDE OIL
Before we even mention developing bearish internal energy market fundamentals, we suggest that big picture outside market developments favor the bear camp. Obviously, fear of a hawkish shift by the Fed, a rising US dollar and periodic large losses in equities weigh heavily on energy demand expectations. While not a major negative, the API yesterday posted a crude oil stock decline of only 815,000 barrels as that argues against a larger projected decline in today’s EIA crude oil stocks (projections call for a decline of 2.6 million barrels).
While most omicron demand fears are centered on Europe, the product markets are growing increasingly concerned about the potential threat against global demand. The product markets are also under pressure because of spillover selling from crude oil and equities. Unfortunately for the bull camp, this week’s Reuters survey pegs gasoline stocks at the EIA to increase by 1.6 million barrels and the gasoline stocks deficit to year ago levels is already the smallest of the major energy market inventory components reported on by the EIA.
NATURAL GAS
While the natural gas market is also suffering from bearish macro-economic pressures, a colder weather forecast for the US should give sellers pause. However, the start to the heating season has heating degree days falling further below normal until entrenched cold is seen next week. Fortunately for the bull camp, European natural gas prices remain at such lofty levels that the US is likely garnering fresh export business from Asia despite a surging US dollar.
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