Written Commentary
CRUDE OIL
The petroleum complex has been one of the few sectors that has avoided steep selloffs during the recent “risk off” mood in global markets. But while there have been some bullish supply developments, crude oil and the products remain vulnerable to profit-taking and long liquidation. July crude oil had a volatile start to the week on Monday as it rebounded sharply from early lows to finish the day in positive territory, and it has been able to build onto that overnight. The catalyst for crude oil’s recovery was a report that Libya’s crude oil production may have fallen more than 1 million barrels per day (bpd) due to political turmoil.
In contrast to crude oil, RBOB and ULSD finished Monday lower. They are both posting moderate gains early today but remain inside yesterday’s ranges well below last week’s highs. Ideas that rising inflation around the globe could lead to a decline in driving remain a source of pressure. UK petrol prices reached another new all-time high early this week, but the UK Automobile Association said that prices may top out by the end of this week, and this may have dampened market sentiment. Concerns that COVID restrictions in Beijing and Shanghai will diminish Chinese fuel demand has also been a source of pressure.
NATURAL GAS
Natural gas has held within a relatively tight inside-day range so far this morning, but the market continues to see choppy price action. The July contract was unable to sustain an early recovery move on Monday and finished with a moderate loss, but it is finding mild support early today. Estimates that Texas saw record high power demand Monday provided support to the market, as that should strengthen power plant and air conditioning demand for natural gas. A large portion of the US is expected to see above-average temperatures over the next few weeks, and that should boost demand as well.
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