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Demand Destruction Fear Give Bears Control

CRUDE OIL

As in many other markets today the latest coronavirus development has put market sentiment in a risk off/liquidating mood. Therefore, classic supply fundamentals are likely to be discounted and fear of energy demand destruction embraced. While the markets expected the Chinese to join other countries in selling strategic supply, the country continues to merely talk with other countries regarding their release of strategic supply and that leaves a bearish supply-side threat in place but on the back burner.

While the markets would have been heartened by news that global road traffic remains strong and supported because of the significant US driving holiday, the gasoline market has discounted the positives and fully embrace the negatives. Certainly, the gasoline market could hold up better than other markets due to its relative tightness but also because car travel may increase as airline traffic decreases. It is also possible that a return to lock down in the US could idle additional refinery capacity and or refiners could decide to pare back production in anticipation of a reduction in demand.

NATURAL GAS

In a very surprising development the natural gas market has forged a 5-day high in the early going today and that clearly flies in the face of most commodity price action. However, it is likely that the US has entered the seasonal withdrawal window and supply forces in natural gas are slightly supportive.

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