Written Commentary
CRUDE OIL
Clearly, the crude oil market has lost upside momentum and has consolidated for 4 trading sessions and that is likely the result of a lack of fresh news on the Russian/Ukraine situation. However, a major bank analyst this morning has suggested that OPEC plus will move to raise output quicker than has been agreed to already as the cartel responds to price signals. However, OPEC plus has agreed to raise production by around 400,000 barrels per day each month already, but that increase has not been fulfilled consistently.
While the gasoline market has not lost as much momentum as the crude oil market, prices have tracked sideways and could be slightly undermined because of news that strike talks between refiners and workers have been extended beyond the initial strike deadline. However, in the event of a strike US products like diesel could begin to lead the entire energy complex higher.
NATURAL GAS
While the natural gas market has stalled below and within yesterday’s range this morning, fundamental news remains in favor of the bull camp. In a statement that could chafe European consumers and leaders Russia’s Putin has indicated Hungary is buying gas from Russia at lower than European market prices. Furthermore, the Russian national gas company (Gazprom) indicated their January gas exports were down 41.3% versus year ago levels. Therefore, the supply situation in Europe continues to tighten precipitously, especially with the key Russian gas pipeline for Europe remaining in reverse flow mode since December 21st. Furthermore, the Russian gas exporting company has not secured any capacity through the pipeline for this month yet! Qatar has requested that the EU block any resale of natural gas outside the EU, which could impede any diversion of LNG supplies from Asia customers to Europe if Russia goes ahead and invades Ukraine.
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