Written Commentary
CRUDE OIL
Obviously, the energy markets were significantly overbought from technical and fundamental euphoria perspectives. In addition to a shift from big picture broad-based macroeconomic optimism, the oil markets today is facing several fresh supply and demand negatives. From the demand front, the downshift in market sentiment naturally translates into a softening of energy demand views. Furthermore, the markets are embracing headlines suggesting the US is at a price disadvantage in the Asian markets.
In retrospect, the sharp rally in gasoline yesterday was difficult to explain from an internal fundamental perspective and therefore a noted correction would not be surprising. In fact, instead of deriving support from optimism flowing from big picture macroeconomic commodity price gains earlier in the week, the gasoline market today sees conditions creating doubt for demand.
NATURAL GAS
The trade described the action Thursday as a capitulation on the idea that this winter would not present extreme tightness in natural gas supplies. Granted, weather forecast reaching out into February initially lacked extreme cold and the heating degree days continue to fall further below normal, but overnight forecasts have shifted cooler.
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