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Peace Talks Give Bears an Edge

CRUDE OIL

Holding back energy markets to start the trading week is fresh peace talks, the closure of the Shanghai port, a modest rise in Cushing, Oklahoma crude oil stocks last week, and a mostly level weekly US crude oil production figure. On the other hand, overall US crude oil stocks declined (expanding the net deficit to year ago levels to 89 million barrels), exports continue to pull down US supplies and all major inventory levels in last week’s EIA crude oil report showed contractions.

With the gasoline market last week ranging down sharply and then rejecting that washout with a $0.15 rally into the Friday close, the charts transitioned from bearish to bullish. However, with prices this morning falling back toward last Friday’s lows, spillover weakness anticipated from crude oil and fear of slumping Chinese fuel demand, the bear camp has increased its standing to start the new trading week. While product markets stocks in last week’s inventory report declined, the US refinery operating rate is running 6% above year ago levels which in turn should increase the flow of gasoline and diesel supplies ahead.

NATURAL GAS

While Russian national oil company officials on Sunday indicated that gas flow via the Ukraine pipeline continues, the sharp range up breakout extension in May natural gas last Friday gives the bull camp an edge from a technical perspective to start the new week. Despite Russia claiming gas continues to flow from Russia through the Ukraine, there are reports this morning that Gazprom does not plan any spot sales this week and that firms the price outlook to start the new trading week.

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