Written Commentary
CRUDE OIL
While technical analysts will label the Monday action as a blowoff top, fundamental analysts will remain bullish off the potential for more Russian energy export embargoes. Furthermore, with crude oil this morning regaining over half of yesterday’s massive down trading range buyers continue to bargain hunt. The US and UK have indicated they are unilaterally considering a ban on Russian oil supplies while the euro zone appears to be against an embargo. The likelihood of a European ban on Russian energy was made less likely overnight following fresh threats from Russia to cut off the flow of natural gas in the event the euro zone officially sanctions oil.
Gasoline futures prices also exploded yesterday and gave off the impression of a “blowoff top”. In a negative technical signal, the blow off rally in gasoline was forged on low volume and a decline in open interest. In a demand positive development, several US states and the US federal government are considering a reduction in gasoline taxes as that would take some pressure off US consumers. However, some economists suggest demand will be curtailed even with current prices, as consumers are forced to decide between driving and retail purchases. From the supply-side of the equation, calls for an embargo of petroleum products should not be discounted especially given Russia’s importance to the world supply of fuel.
NATURAL GAS
Like the petroleum markets, the natural gas market also forged what appeared to be a “blow off top” in the Monday trade. However, late-breaking news suggests the EU is unlikely to ban Russian gas with the EU buying 45% of its gas from Russia. Another negative development for natural gas is very active flow through the Yamal pipeline from Russia to Europe which the Russians suggest will be immediately cut off in the event of an official ban by the EU. In positive developments, the French announced their gas price curbs would be extended until the year-end and floating storage this week fell 13%.
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