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Energy Market Bulls Regain Control


With a 4 day high in the early action today forged in the face of a higher dollar, projections that OPEC plus will increase output in their meeting next week and in the face of Goldman predictions that a big disruption of energy supply from Russia will not be seen, the bull camp clearly retains an edge. Fortunately for the bull camp, crude oil in storage in Europe declined by 3.7% on a week over week basis and the trade overnight is more upbeat toward Chinese growth off projections that Chinese support of their economy will foster growth.

Unlike the crude oil market, the RBOB contract has forged a range up move into new contract high ground and could be seeing support from a projected jump in Chinese lunar new year travel. In fact, estimates call for a 36% jump in travel compared to last year. In retrospect, we saw the recent chop in gasoline as the market working off an overbought technical condition from a 2-month/$0.60 rally! However, statistics from the EIA do present a more negative look for gasoline than crude oil and distillates.


With the natural gas market ranging sharply higher and trading through its 200-day moving average, the market appears to have come alive again. In retrospect, we are surprised that the market failed to show upside action in the face of news that US and European officials were scrambling to secure alternative LNG supplies. In fact, overnight Bloomberg suggested that the US President would not be able to supply Europe with enough gas if Russian supplies are cut off. It is also surprising to see gas prices rally in the face of warmer European weather and reports of steady LNG imports, but the threat against supply from the Russian border challenge is a dominating force.

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