Written Commentary
CRUDE OIL
While petroleum prices remain close to their 2022 highs, they saw a negative shift in tone late last week that has continued into this week. Unless there is a significant turnaround in global risk sentiment, crude oil and the products are vulnerable to even more profit-taking and long liquidation. July crude oil closed lower on Friday and is lower again this morning. It did finish the week with a gain of $1.80 (up 1.5%), for the seventh positive week in a row. However, ongoing COVID restrictions in Shanghai and Beijing have diminished demand prospects in China. A report over the weekend that Beijing is having a “ferocious” COVID outbreak amplifies those concerns. Last Friday’s US CPI report put further pressure on crude oil and the products on ideas that high inflation will start to eat away at demand.
The products finished on a downbeat last week, with July ULSD having a negative key reversal on Friday and July RBOB having an outside day down session and a negative key reversal for the week. They remain under pressure early this morning. Average US retail pump prices for regular unleaded climbed above the $5.00 per gallon level last week. This was not an all-time high when adjusted for inflation, but it did generate headlines in the mainstream media. UK petrol prices continue to climb into record high territory, which has further dampened market sentiment.
NATURAL GAS
It looks like natural gas could continue its choppy price pattern over the next few days. There are reports that Texas will have record high power demand today, and that should provide some measure of support to the natural gas market. But a major LNG terminal on the Gulf Coast will be off-line for three weeks following an explosion and fire, and that may divert some US gas supply that had been destined for export back to the domestic market. US LNG terminals were close to capacity before last week’s event, and they are likely to return to those levels by the end of next month.
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