Written Commentary
by Stephen Platt and Mike McElroy
Price Overview
Despite trading quietly for most of the session, the market managed to surge higher late in the day as the crude oil pushed through its recent highs to settle at 115.07 basis July for a gain of 98 cents. Gasoline made new contract highs on the arrival of summer driving season, gaining 12 cents to end the day at 3.9119, while heating oil saw smaller gains of 5 ½ cents. The market drafted strength off the potential for an agreement over the weekend on an EU embargo of Russian oil, spillover from a continuing recovery in US equities, and talk from Bank of America that crude prices could surge to 150 dollars a barrel.
The market was also jittery going into the long weekend after Iran seized two Greek oil tankers in the Persian Gulf in an apparent retaliation of US actions against an Iranian tanker earlier in the week. The increased tensions added further uncertainty regarding nuclear negotiations with the West.
Although it was achieved on light volume, the close above 115 could lead to near term follow through to the 116 area if we can get through the long holiday weekend with no major changes in the status quo. Initial support should be found near 110.70.
Natural Gas
Prices have retrenched to end the week after making a run at the 9.50 level the last two sessions. Yesterday’s storage report showed an 80 bcf injection, below expectations near 89. This increased the deficit to the 5-year average to 327 bcf and brought out a wave of buying after the release. The rally failed to hold as the July contract lost 10 cents yesterday and another 17 cents today to end the week at 8.727. Weather forecasts had some negative sway as CDD expectations have been revised downward recently to more seasonal levels, but with current volatility and decreased volume this market can move 50 cents for no reason whatsoever. The failure to settle through the 9 dollar level this week could signal a near term pullback, with the next support coming in near 8.50, which would mark a 50 percent retracement of the rally since May 10th. A settlement above 9 dollars would go a long way toward giving bulls the confidence to push for the 10 dollar level.
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