Written Commentary
NATURAL GAS
Apparently, the bull camp in natural gas continues to display resiliency as the aggressive gains over the prior three trading sessions have held in the June contract and the market is showing signs of building a consolidation pattern. Limiting the upside track in natural gas are suggestions from Asia that buyers have backed off with gas prices reaching $11.00, news that Chinese hydroelectric power generation is set to jump off significant rains and from expectations of a significant inflow to EIA inventories tomorrow. Fortunately for the bull camp US cooling degree days are expected to run 11 degree days above normal into this weekend and we see the prospect of further stop loss buying from a very large net spec and fund short.
CRUDE OIL
With yesterday’s API oil stocks inflow crossing up the trade’s expectation for a moderate decline, the trade has embraced views that current supply is “ample”. Another fresh bearish development overnight surfaced from a report of Russian crude oil flow in the seven days ending May 5th reaching the highest level seen last year. On the other hand, weekly crude oil storage in Europe declined by 6.1% and gains in global equity markets have helped cushion energy demand fears. However, fresh damage on the charts overnight and fears of a build in EIA crude oil inventories later this morning, leave the bear camp in control. In fact, after a prediction from a private source that EIA inventories later today would see a larger than expected decline, a slight inflow could add downside price momentum. However, we see the net spec and fund long in crude oil falling quickly and already at mostly liquidated standing and the “ample” supply view is countered by current EIA oil inventories at a massive 12.8 million barrels below the 5-year average inventory level for this time of the year. Yesterday the EIA probably put the brakes bargain hunting buying with a minimal 30,000 barrel per day lowering of their 2024 World Oil Demand “growth”. Unfortunately for the bull camp, the EIA also revised their 2024 US production higher by 270,000 barrels per day versus a previous expansion forecast of 280,000 barrels per day. However, price direction today will see at least temporary direction from the headline EIA crude oil inventory change and to a lesser degree from the weekly implied gasoline demand reading.
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