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Corrective Track in Natural Gas

CRUDE OIL

On one hand, the energy markets are undermined because of “hope” for progress in Ukraine/Russian peace talks. On the other hand, news that Kazakhstan has 1/5th of its oil production down for at least a month due to storm damage at ports should support prices. In a longer-term negative Russia has stopped filling a pipeline system because storage facilities are full. However, with sanctions unlikely to be lifted soon it is immaterial that Russia is building exportable supply. Another negative demand development flows from a Saudi Arab light price increase to Asia of $5 per barrel as that could discourage buyers and ultimately reduce retail demand.

While gasoline prices have rebounded into positive ground early today and clearly rejected yesterday’s spike down move, the market looks to remain vulnerable to fears of demand destruction from ultrahigh retail prices. The gasoline market should also be indirectly undermined following stories from Bloomberg about “swelling global fuel supplies”. Both RBOB and ULSD found heavy pressure on Monday and early into today’s trading, due in large part to the potential for increased product supplies into Western Europe.

NATURAL GAS

With natural gas prices unable to extend their winning streak to a sixth session in a row yesterday and prices weaker again today, that may signal a near-term pullback over the next few days. In a mixed overnight development LNG daily storage at US export terminals increased by 11%, but many traders believe that opens the door for a quicker pace of exports to Europe and perhaps even Asia. European buyers of gas are hopeful of lower prices from the slowing of the Chinese economy from the latest infection surge and that is certainly a story that favors the bear camp.

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