Written Commentary
CRUDE OIL
Clearly, the bull camp in crude oil is fighting back against this week’s initial washout. The upward track this morning is thought to be the result of indications from the International Energy Agency that the world oil market remains “tight”. It is also possible that prices are being lifted by the IEA revelation that the OPEC plus cartel production last month came in 900,000 barrels per day below their target. On the other hand, the IEA indicated that OPEC output increased by 130,000 barrels per day in January.
As indicated in the crude oil coverage today, the product markets are beginning to show greater resiliency than the crude oil market. In fact, the gasoline market appears to have regained an edge over ULSD with gasoline crack margins firming and stocks at the EIA shifting back into deficit this week. The gasoline market should also derive support from news that weekly Amsterdam, Rotterdam and Antwerp gasoline supplies declined and they should derive some residual support from the much hotter than expected US implied gasoline demand reading released from the EIA earlier this week.
NATURAL GAS
Yesterday the beating continued in the natural gas market with another new low and traders very confident in their ability to press the market to even lower levels. However, the market this morning is showing respect for yesterday’s lows and there are signs of bargain-hunting bids in Asia and Europe. Obviously, mild temperatures are a key function behind the sustained washout this week but the lack of fresh incendiary developments surrounding the Ukraine has also contributed to selling.
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