Written Commentary
CRUDE OIL
With the gain in crude oil prices into the contract high yesterday clocking in at $21 above the point where the last COT positioning report was measured, the crude oil market remains only moderately overbought. Furthermore, the crude oil market yesterday forged a $10 plus trading range in a sign that hyper volatility has settled into the market, but that could also signal the potential for a corrective setback to end the week. On the other, seeing Baltic oil tanker rates reach the highest level since 2008 will likely shift more demand away from the Black Sea area. In another bullish development overnight Libya’s largest oil field was under threat of shutting down because of protests. Not surprisingly, the crude oil market fell back sharply from its highs yesterday following rumors that there could be an Iranian nuclear deal in the works.
At least in the early going today, the April gas contract appears to have forged a measure of consolidation support around the $3.25 level. While recent chart action has presented images of a blowoff top, yesterday’s action showed the largest range since November 26th and managed the action on slightly lower trading volume than was seen in the prior two trading sessions. With gasoline since the last COT positioning report climbing $0.72, we suspect the net spec and fund long has reached up to the highest level since January 2021.
NATURAL GAS
While the natural gas market has been presented record high Asian and European LNG prices this week and some panic buying has been seen, reports that Cnooc has stopped placing offers on the Shanghai petroleum and natural gas exchange because of high prices is a potential major negative development. While the magnitude of the weekly withdrawal from storage was neutral to bearish for prices, the percentage deficit versus the 5-year average has become the largest of this winter and might be expected to tighten further given cold temperature forecasts for the US and Europe.
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