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Macro Influences Rekindled Bullish Sentiment

CRUDE OIL

We are surprised with the strength of crude oil prices in the early action today, as reports have a slight rebound in production from Libya and Kazakhstan. However, the trade is attributing the rally this morning to strength in US equities, weakness in the US dollar and perhaps because of news that China in 2021 consumed a record amount of sanctioned oil from Iran and Venezuela. In other words, total consumption from China is likely better than expected when the illegal (in the minds of the US and others) barrels consumed are added to the legal barrels consumed. On the other hand, it is possible that prices are drafting lift from expectations of another decline in weekly EIA crude oil inventories.

Like the crude oil market, the gasoline market this morning has definitively rejected the prior closing level of $2.2754 and that level becomes a key pivot point during today’s session. Surprisingly, a massive 1.3 million US infection count from Monday has not undermined gasoline despite the likelihood of a reduction in public interaction/travel. However, a minor refinery outage combined with very positive early US equity market action provides fresh bullish buzz to start today.

NATURAL GAS

In retrospect, the sharp gap higher range up action on Monday was attributable to extreme cold in the Midwest and Eastern seaboard of the US. In other words, the natural gas market remains sensitive to temperatures that could rekindle fear of tight US winter supplies. Certainly, US heating degree days remain below normal but have started to “catch up”. On the other hand, gas prices in Europe continue to soften with UK wholesale April gas prices reportedly falling by 5.9%. In addition to mild temperatures, European gas weakness is attributable to fresh supply arriving in Europe via tanker especially with some terminals operating at the highest level since December 2019.

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