Written Commentary
CRUDE OIL
While a range up extension in crude oil to the highest levels since the latter part of March failed to hold yesterday, prices this morning remain near 60-day highs. It is also surprising to see the crude oil market rally yesterday following a “tweaking” of the specifics in the EU ban of Russian oil. In our opinion, the “tweaking” provides smaller uncommitted entities some latitude with Russian imports. Even though the energy markets have not correlated tightly with the ebb and flow of economic data, we detect a measure of demand fears from the hike in rates, a stronger dollar and from soft German data this week.
Apparently, the RBOB market has yet to fear a setback in demand from extremely higher retail pump prices. It also should be noted that the RBOB fundamental set up from the EIA report is less bullish for gasoline than for distillates and diesel, but the gasoline market has remained strong in the face of a noted correction in ULSD prices. From the demand front, the bulls are cheered by a global road traffic report projecting increased driving activity.
NATURAL GAS
With a range up move to new contract highs again overnight forged in the wake of a patently bearish weekly EIA storage report and following news that Germany will solve high prices and shortages of supply by reducing LNG demand the gas market has some negative fundamental news remaining in place. In fact, not only were weekly EIA gas inflows larger than expected the deficit versus the 5-year average contracted slightly.
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