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Petroleum Bulls Regain Upper Hand


Even though crude oil faced several negative outside market fundamental developments on Thursday, it managed to reject the initial slide and recover back toward the vicinity of contract highs. Therefore, it is not surprising that the entire petroleum complex has forged fresh contract highs early today. The primary bull arguments are views that OPEC plus will not deliver on supply promises, demand continues to outstrip supply, and expectations that the recent winter storm hindered US production and distribution.

The gasoline market has ranged higher again and forged new contract highs off positive pull from crude oil, from favorable traffic/high-frequency data for London and New York and from the news that Mexico gasoline and jet fuel demand reached a 2 year high in December! Unfortunately for the bull camp, the supply-side of the equation is less supportive as yesterday’s Amsterdam, Rotterdam and Antwerp gasoline supply report showed a week over week increase of 8%.


Apparently, several bullish forces like the threat of supply disruptions in Texas from weather, increased heating demand in the Midwest/Eastern US, sharp gains in petroleum prices and news that Russia signed a 30-year gas deal with China are being discounted early today. The bull camp was clearly disappointed yesterday as prices slumped despite a 5% projected decline in US gas production from the recent winter storm.

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