Written Commentary
CRUDE OIL
In addition to technical stop loss selling from a chain of chart support point violations, the energy markets have suddenly embraced concerns of slackening global demand. In addition to soft US implied gasoline demand readings, the markets know half of West African May crude oil cargoes are still on offer with buyers apparently looking for lower prices. Fortunately for the bull camp, Indian crude oil imports have remained steady versus year ago strong import totals and China saw strong first quarter imports as they filled out storage. Yet another bearish demand signal came from the IEA which seems to have tempered their short term energy demand outlook. Furthermore, EIA crude oil inventories posted the highest levels in over a year and some traders decided to temporarily stand aside thinking Israel would bide their time before retaliating. However, there are unsubstantiated rumors that Israel is considering a precision strike against Iran’s Kharg Island which has 14 tanker berths, and 41 crude oil storage tanks with a capacity of 24.5 million barrels. Some suggest that because the Biden Administration and parts of US congressional factions have turned against Israel, the Israelis could threaten the US with an explosion in US pump prices into the election which would likely result from a direct attack on one of the world’s largest oil terminals.
NATURAL GAS
Even though the natural gas market has not tracked petroleum prices recently, the definitive washout in crude oil, gasoline, and diesel prices combined with deteriorating global macro sentiment should leave the bear camp in control. In fact, expectations for this week’s EIA gas in storage report this morning call for an injection as large as 56 BCF and noted builds are likely to entrench before cooling demand picks up. Bearish sentiment is so entrenched that the natural gas market yesterday discounted reports that German natural gas production would decline by more than 10% this year because of the push to use Green energy.
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