Written Commentary
CRUDE OIL
While July crude oil has not taken out yesterday’s high, a close at early price levels would represent a new contract high close. Obviously, the official EU ban of Russian oil is being factored further into prices without concern of slackening demand. Limiting the initial upside in crude oil prices today is a 2% increase in ARA crude oil inventories on the week and suggestions from the Russian government that rerouting oil shipments from Europe to other destinations will limit the negative impact of sanctions. Other negatives limiting crude pricing this morning include talk that Russia may be exempted from OPEC plus production restraint and news that the Saudis may leave the OPEC plus agreement. In addition to removing 3 Russian central banks from the global banking system “swift” on Monday the EU has now implemented bans against providing insurance to Russian shipping companies.
Unlike the crude oil market, the gasoline market ranged sharply higher and managed to hold those gains. Like crude oil, the gasoline market forged a very significant trading range of $0.14 and more importantly the July RBOB contract definitively breached the psychologically important $4.00 level. Certainly, gasoline saw indirect support from the long-awaited EU oil ban of Russian supply, but gasoline was also lifted by statements from major US refining companies indicating they were having difficulty meeting demand.
NATURAL GAS
While the trade did not expect the EU to talk about a ban of Russian gas supply, the Russians unilaterally announced they would halt/reduce supply flowing to Norway (Netherlands, Danish, and a German oil company) and therefore the process of ratcheting down use of Russian gas has started. It is likely that prices are being supported this morning following Bloomberg reports that the Russian national gas company Gazprom saw its January through May exports dropped by 28% on a year-over-year basis. Some pressure on prices yesterday was the result of EIA lower 48 state natural gas production gains in March of 1.7% on a month over month basis.
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