Written Commentary
CRUDE OIL
The petroleum complex continues to see volatile price action, but it is showing signs that prices are approaching near-term lows. Crude oil and the products may be able to finish this week on an upbeat note, but they will need to see a significant improvement in global risk sentiment following this morning’s events. August crude oil followed through on Tuesday’s outside-day down and key reversal by finishing Wednesday with a heavy loss, and it has reached a new two-week low overnight. Today’s Swiss rate hike has ramped up market anxiety over inflation, which could have a negative impact on the global demand outlook over the balance of the week.
The product markets outperformed crude oil Wednesday with ULSD reaching a new high for the move and finishing with a strong gain, but both RBOB and ULSD have fallen into negative territory overnight. While the EIA report showed US refinery utilization having a small decline from the previous week, it remained above 90% for a sixth week in row, and that has not occurred since last August. Implied gasoline demand also had a small decline but remained above 9 million bpd for a second straight week.
NATURAL GAS
Natural gas prices remain near the lower end of Tuesday’s downdraft, but they have been grinding higher overnight. If the market receives bullish news from the EIA storage report today, it could be in position to extend its recovery move. Warm weather in the forecast for much of the continental US has lent modest support to the market since its collapse on Tuesday in the wake of an announcement from Freeport that its LNG export facility would remain shut for an extended period. Texas is likely to see record power demand late this week, and the two-week forecast has much above normal temperatures in the eastern two-thirds of the US.
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