Written Commentary
CRUDE OIL
It has become clear that energy prices are under assault from deteriorating global demand views. Apparently, the trade does not see Europe implementing a Russian energy embargo anytime soon and like several other physical commodities, economic headwinds are surfacing from news that Russian objectives are to capture southern Ukraine. In an even bigger demand threat, headlines continue to surface about the prospect of a lockdown in Beijing.
Surprisingly, the gasoline market managed to avoid the type of weakness seen throughout many physical commodity markets at the end of last week. While the trade is expecting support from improving seasonal demand several weeks in the future, this week’s EIA implied gasoline demand reading forged an upside breakout and that should cushion against aggressive declines. A potential major negative for gasoline comes from speculation of pent-up gasoline supply in China which could result in Chinese oil product exports.
NATURAL GAS
In addition to downside momentum, the natural gas market is disappointed with last week’s bigger than expected EIA injection into storage. In another negative, the Russian national gas company Gazprom continued to export gas to Europe as of Sunday, April 24th. Unfortunately for the bull camp supportive temperatures in the US are now dissipating and the idea that near capacity US LNG exports are failing to tighten supply in the US gives a green light to the bear camp. In other words, US export activity will remain robust, but might not expand due to capacity limitations on both sides of the Atlantic (US terminals, European offload terminals).
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