Written Commentary
CRUDE OIL
With a huge range up trade to the highest level since the initial panic washout in March, and another new high today, it-is-clear that demand destruction fears have become demand hopes. Obviously, the markets could end up being premature about the pace of energy demand recovery, but the confidence provided by vaccines and therapeutics provides fodder for forward-looking demand optimism. However, some negatives surfaced overnight with a large jump in API crude oil inventories of 3.8 million barrels and signs that some Libyan oil is backing up on ships recently loaded for export.
NATURAL GAS
While natural gas has not shown a tight positive correlation with macroeconomic risk on sentiment, we suspect the market will see some modest ongoing support from this week’s optimism. However, hope for improved demand is suspect following reports that China loosened coal import restrictions in-an-effort to reduce winter price spikes as that could reduce Chinese demand for US LNG in the near term. Furthermore, China apparently struck a deal with Indonesia for a shipment coal and that also dampens hope for drastic improvements in demand for US LNG exports.
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