Written Commentary
CRUDE OIL
As usual the energy markets overnight have been presented with several countervailing developments. On the bull side of the ledger the market has embraced hope of improving Chinese demand from a schedule of opening in Shanghai, significant declines in API inventories, news that Chinese April fuel exports declined, a weekly decline in European crude in storage of 7.4%, and from a modest improvement in overall global economic psychology. On the other hand, fresh negatives overnight include chatter that US and Venezuela will resume talks (as that could lift Venezuelan oil export sanctions), signs of significant Chinese reserve building and doubt of a quick progression to an official EU ban of all Russian supply. The crude oil market is facing some fundamental resistance after reports that the US has given a license for Chevron to work with the Venezuelan national oil company, as that could be a precursor to a lessening of export restrictions from sanctions.
Granted, the gasoline market is significantly overbought from a 4-day low to high rally of $0.47 and prices continue to be held back by sensationalizing historic high pump prices. However, as suggested already, the ultra-strong US retail sales reading yesterday suggests record high retail pump prices were not “smashing” demand. The API survey showed US gasoline stocks having a weekly decline of 5.102 million barrels which was a much larger decline than market expectations.
NATURAL GAS
Not to be left out, the natural gas market continues to claw higher along with the petroleum complex. Obviously, natural gas prices are being lifted in the wake of a shift into upbeat global psychology. On the other hand, natural gas has forged impressive gains over the last 24-hours despite signs that the EU would allow some legal purchases of Russian gas in euros to continue, news from the Russian national gas company confirming gas flow through Ukraine yesterday increased, and from promises that Gazprom will continue to ship gas to Europe. From the demand side of the equation, ongoing heat from Texas North into the middle of the US has resulted in projections of record gas demand for electricity output ahead and China also appears to be back in the market for gas in hopes of renewed growth this summer.
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