Written Commentary
CRUDE OIL
While the crude oil market is short-term overbought, and the Russia situation seems to have moderated somewhat, the threat against supply remains and is combined with residual demand optimism to leave the bull camp with the edge. In addition to the threat against supply created by the Russian situation, the crude oil market should be supported following news that crude oil in global floating storage declined by 23% over the last week! Other bullish influences this morning is strong WTI spread action and reports of very tight Asian supplies. While the Chinese holiday could be dented by virus restrictions, the holiday is likely to expand or speed up Chinese oil demand temporarily.
With the supply and demand fundamentals in the gasoline market, the least supportive of the energy complex, the RBOB market is likely to continue to take its direction from the diesel market. However, it should be noted that recent implied gasoline demand readings have returned to 5-year average levels which is somewhat deceiving considering that implied demand has grown consistently over the last 5 years.
NATURAL GAS
While the Russia situation has moderated slightly, that issue remains paramount to near term gas price action. In fact, pipeline flows from Russia are still not providing badly needed gas to Europe. Overnight reports suggest that the Russian national gas company (Gazprom) will not offer gas on the electronic spot marketplace this week. While gas bulls were benefited because of a Norway LNG plant outage, that disruption was offset by slack demand from Europe.
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