Written Commentary
CRUDE OIL
Surprisingly, the crude oil market is trading in positive territory early today despite rising global demand concerns. In fact, Chinese demand is seriously in question following the lack of a PBOC rate cut overnight and evidence that Chinese imports of oil from Saudi Arabia and Russia fell by 13% and 14% respectively last month. On the other hand, with the last of pre-embargo Russian supply in the US system now, forward US supply news could shift positive. Overnight supply news was supportive with crude oil in ARA storage facilities declining by 4.6% on a week over week basis and API crude stocks falling by much more than expected.
While a large portion of the setback in gasoline prices yesterday came from spillover selling in crude oil, fear of demand destruction due to high pump prices provided long liquidation yesterday which then translated into more significant stop loss selling. However, we suspect softer Asian crack margins have been seen as an indicator of softer demand from buyers in the region and that negative news is accentuated by news of a 10.8% increase in gasoline production in March.
NATURAL GAS
With the natural gas market posting a 13 year high earlier this week, a warmer “intermediate” US temperature forecast and Russian confirmation of ongoing westerly flows of gas, the sharp washout in prices yesterday was justified by classic fundamentals. In a supportive development yesterday, (seemingly fully discounted), the Russian national gas company (Gazprom) has slowed its pipeline bookings for deliveries in May. Furthermore, trade talk continues to propagate views of aggressive European LNG imports from the US.
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