Written Commentary
CRUDE OIL
While internal crude oil market fundamentals remain relatively stable, the global macroeconomic condition is thought to be slowing and inflation fears are ebbing and that leaves the potential for hedge fund selling of oil. On the other hand, Easter demand for jet fuel, diesel, and gasoline picked up and perhaps more importantly US diesel crack margins reached fresh record levels again. Furthermore, reports are that BP’s refineries are running at capacity highlights a good environment for crude oil demand. In fact, UK gasoline sales reportedly jumped by 50% on a year-over-year basis in March with demand returning near pre-pandemic levels. Therefore, US product demand and tightness should keep demand for US physical crude positive.
Certainly, the impressive reversal and new high for the move in gasoline yesterday improved the charts in RBOB. Furthermore, the market has been presented with positive demand news in the form of record US fuel exports from the Gulf Coast (tightening US storage), the UK is reportedly nearing pre-pandemic demand levels and UK March consumption grew by 50% over year ago levels. In a potential longer-term supportive development, US diesel refining margins continue to post new records which in turn could shift summer crack mixes to yield less gasoline. Granted, ongoing activity restriction fears in Beijing offset reports of loosening restrictions in Shanghai.
NATURAL GAS
In retrospect, the natural gas market spent the Monday trade in positive territory and in the process posted a 9-day high. Therefore, a sharp range up new high for the move this morning sets the stage for a retest of contract highs Another supportive condition for prices is the periodic backing up of European gas delivery through ocean terminals due to capacity limitations. Furthermore, the transport of LNG from US terminals is also a limiting demand force.
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