Written Commentary
by Stephen Platt and Mike McElroy
Price Overview
The petroleum complex saw some stabilization today with an inside day on the charts after hefty losses to start the week. The April crude oil pushed well below the 100-dollar level yesterday before slipping another 1.40 today to settle at 95.04. Pressure continued to be provided by positive statements regarding the Russia/Ukraine negotiations and fear of a return of lockdowns in China due to the spread of the Omicron variant. Global concerns regarding demand destruction due to high prices seemed to add to the negative tone as the theory that “high prices are the best cure for high prices” began to prove true. The weekly storage report was generally bearish and offered further selling pressure as the day progressed.
The DOE report indicated crude oil stocks had increased by 4.3 mb against expectations for a decline near .7. Distillate stocks also came in higher than estimated at a .3 mb build verses an estimate draw of 1.9, while gasoline was in the opposite direction with a 3.6 mb drawdown, above the 2.1 mb decrease that had been expected. Production remained steady at 11.6 mb/d, while total stocks were off 3.6.
With most of the war premium extracted from the market over the last week, trade seems to be putting a lot of hope in positive statements emanating from talks between Russia and Ukraine. The US Federal Reserve actions this afternoon has also led to some wait and see trade, with expectations pointing to a .25 basis increase, with previously suggested potential for a .50 hike fading due to the war. Despite trading below the 100-dollar level, tensions remain high and any negative news from Ukraine could cause a quick spike in prices. Resistance now looks likely at the psychological 100-dollar level, with support at 95.00 and below there at 93.50 which marks the highest close prior to the start of the war.
Natural Gas
The market found good buying interest today as the April contract gained 13 cents to settle at 4.748. A specific driver was not apparent, as prices seemed to find support from some normalization expected with temperatures in the back end of the 15 day forecasts from previous warmth, along with the continued slow recovery in output after a spate of freeze-off issues across producing regions this winter. Tomorrow’s storage draw is estimated at 74 bcf compared to the average for this time of year at 65. With a violation of 4.50 yesterday and subsequent move higher, that level stands as key support on a closing basis. The 4.82 area still looks like initial upside risistance as it marks a 50 percent retracement of last weeks break.
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