Written Commentary
CRUDE OIL
The beat goes on with crude taking out yesterday’s highs and seemingly poised to take out this week’s highs and post the highest trade since March 9th. While slumping energy demand fears remain in a front and center position, views of an EU embargo deal from the upcoming (Monday/Tuesday) EU meeting, a US seizure of an Iranian oil tanker in the Mediterranean, faltering nuclear talks all provide the bull camp with ammunition this morning. This week’s EIA report was unremarkable compared to the Tuesday API report, and especially against last week’s EIA report.
As indicated in the crude oil coverage today, the EIA report was supportive of crude oil and bearish toward gasoline. Also as indicated already, this week’s US refinery operating rate posted the 3rd highest reading ever and that in turn should step up the flow of gasoline supply. However, summer demand is set to rise and that could serve to countervail any increase in product flow. In fact, US EIA gasoline stocks into the summer driving season are at a year-over-year deficit of nearly 13 million barrels and this week’s gasoline stocks reading was the lowest in 23 weeks.
NATURAL GAS
While the natural gas market failed to hold most of the sharp range up action yesterday, the market did forge new contract highs in the face of a cool US weather forecast. On the other hand, Bloomberg/Dow Jones reporters overnight have noted chatter in the market anticipating further gains in gas prices from the beginning of the northern hemisphere cooling season. In another slightly bullish development, Ukraine has struck a deal to receive European gas via pipelines as that taps global supply indirectly. While natural gas prices yesterday shrugged off reports that the Russian national gas company continues to push supply through the Ukraine gas system, that flow continues today.
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