Written Commentary
CRUDE OIL
While the June crude oil contract did not hold the overnight new high for the move, the charts present a positive argument for the bull camp. Fresh developments favoring the bull camp this morning include a decline in crude oil global floating storage of 1.08 million barrels last week, better Chinese GDP readings and growing expectations of a complete EU ban of Russian oil. Apparently, the trade is discounting the threat of slowing Chinese demand because of overnight news, but perhaps the bull camp is instead embracing news of curtailed Libyan output (from protests). In fact, Libya has indicated it will close its biggest oil field and may close other facilities because of protest inspired disruptions.
Like the crude oil contract the gasoline contract holds a relatively small net spec and fund long versus history! From a technical perspective, the gasoline market broke out above a key psychological level of $3.40 overnight but recoiled from that breakout. Underlying fundamental support for RBOB from last week came from a 2.5% decline in the US refinery operating rate and from a larger than expected outflow in EIA gasoline stocks last week.
NATURAL GAS
Unlike the petroleum markets the natural gas market has held a significant upside breakout this morning. As indicated in the petroleum market coverage today the trade has increased the potential for a complete EU ban of Russian energy and Chinese energy demand has been indirectly lifted by reports of exploding coal prices in China resulting from the inability to import enough coal due to lockdowns at ports. While import flows of gas are not tightly correlated with Chinese electric power production, it should be noted that Chinese March power output increased by 0.2%.
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