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Chinese Demand Fears vs Russian Supply


We see the positive traction in oil prices this morning the result of reports of extensive Russian bombing of cities throughout the Ukraine. Apparently, the markets retain some hope of progress in the talks as crude oil prices following a high to low 3-day slide of $18 should have posted larger initial gains today. Limiting the upside in crude oil is a 13% increase in Amsterdam Rotterdam and Antwerp crude oil supply and comments yesterday from Russia promising to limit attacks on the capital city.

In addition to negative spillover from crude oil yesterday, there has been significant damage on the RBOB charts and most importantly, there are reports that traffic congestion around the world is moderating. As indicated already, Chinese independent refiners are expecting a slowdown in demand for fuel with estimates calling for a 14% decline in Chinese fuel demand if additional lockdowns are enforced. On the other hand, Bloomberg overnight predicts Russian oil product exports are projected to drop by 19% this month on a month over month basis thereby offsetting some global demand losses.


While the natural gas market was pulled down sharply by the washout in petroleum prices yesterday, pressure on natural gas prices is not limited to the spillover from petroleum prices. In fact, with Russia capable of turning up pipeline flow to Europe without a full peace deal and many buyers caught short-handed, we see Russian natural gas supply flow ultimately returning quicker than petroleum flow.

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