Written Commentary
CRUDE OIL
While crude oil Prices Overnight bolted higher and surged above $130 per barrel in the April contract, the market sits $7.20 a barrel below its early high as of this writing. Part of the sharp range up extension was seen from House of Representatives leadership indicating they were considering oil sanctions. A minimal addition to the bull case was seen this morning from a 2.3% decline in global floating crude oil supply. While the situation in the Ukraine is likely to worsen significantly and control prices for now, more countries (Japan is considering ratcheting up sanctions) will begin to embargo Russian oil and that should continue to ratchet up the threat against lost supply.
Like the crude oil market, the gasoline market gapped higher and forged a fresh contract high. For now, the RBOB market does not appear to be held back yet by talk of demand destruction from ultrahigh retail prices. In fact, in certain portions of the US, retail gasoline prices are likely to hit record highs when adjusted for this morning’s rally. However, Europe’s largest refinery said it will continue to buy Russian crude and will donate profits to a fund for the Ukrainian people.
NATURAL GAS
Even though the natural gas market has seriously lagged the petroleum complex, the bull case is equally if not more powerful. However, key consumers of Russian gas have been unable to aggressively shut off purchases as alternative supply is not at critical mass yet. On the other hand, Europe remains in the critical heating season and embargoing Russian gas completely would put already record European and Asian cash prices through the roof. While the US is spooling p its natural gas exports shipping supply is nearly impossible to meet pipeline flow levels in the near-term.
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