Written Commentary
CRUDE OIL
While surging energy prices have been in place for most of 2021, the Asian trade overnight fretted over high prices dampening demand. The markets are also fearful that unsettling Delta infection counts will undermine demand for fuel. Yet another portion of the Asian trade overnight feared an increase in supply. However, crude oil in floating storage worldwide declined by 8% last week with Asian Pacific storage down 7%, Europe supplies down 35% and the Gulf Coast supply down 77%. On the other hand, speculative short interest is reportedly building in Brent crude oil with Bloomberg overnight reporting “short bets” have reached the highest levels in 4 months.
As indicated already, there are tight fuel supply pockets, US gasoline inventories remain at a large deficit and many mobility studies point to slowly improving demand. However, daily infection counts are becoming troublesome with any hint of renewed activity restrictions capable of sending January gasoline prices below $2.20. Furthermore, open interest in gasoline remains very low compared to the last 11 months and that could also temper the amount of long liquidation.
NATURAL GAS
With the charts in natural gas definitively bearish and European weather unlikely to support prices early this week, we see a downside breakout in trade to the lowest level since September 7th in the coming sessions. However, the trade is touting cooler US East Coast temperatures this week and cold weather in the US Northwest next week. This week’s Baker Hughes rig operating count showed gas rigs increased by two and reached their highest level since September.
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