Written Commentary
CRUDE OIL
While crude oil initially posted a higher high and a three-day high early this morning, the bull camp lacks a strong fundamental argument especially with a peace deal hanging over the market. However, political dealings with Russia and Ukraine rarely travel a straight path and the US president has attempted to ratchet up the pressure on Russia with additional sanctions threats. Historically, the Russian president does not tolerate the “stick” but will sometimes take a “carrot”. On the other hand, Russia is feeling the sting of previous sanctions with only 27 tankers loading crude at Russian terminals as of December 14th compared to 35 tankers on November 30th. Furthermore, Russian seaborne oil supply is approaching 180 million barrels which is a gain of 40% from August. Perhaps most importantly is the fact that Russian gross income from seaborne crude exports is approaching two-year lows from a combination of low prices, a down trending domestic currency and sanction restricted trading volumes.
PRODUCTS
EIA ULSD inventories are the only key oil inventory remaining at a deficit to year ago levels, Ukraine and Russia continue to target heating/energy infrastructure and the potential for a halt of Russian diesel exports hangs over the market until there is a peace agreement.
NATURAL GAS
Like the petroleum markets, the natural gas market is facing resistance from a US warming trend, but we suspect the EIA natural gas in storage report today will show another moderate draw after a massive early-season 177 BCF draw last week. While the February natural gas contract posted a three-day high early this morning, the trade will be watching the next 8-14 day temperature forecast for early January for upcoming direction.
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