Are crude prices settling down?

Bark is worse than the Bite!

While the United States is warning that further acts of aggression by Moscow in Ukraine could lead to sanctions against whole sectors of the Russian economy, including the energy sector at this point the traders are not worried. One reason is Energy leaders of the Ukraine, EU and Russia will meet in Warsaw on Friday.

Oil (NYMEX:CLM14) prices settled down as it became apparent that sanctions against Russia were relatively mild. Despite President Obama's bark new sanctions won't have much bite. Instead of going directly after Russia's energy sector or even its military or banking industries they instead slapped the wrist of some of those close to Russian President Vladimir Putin. These sanctions will do little to dissuade Putin and more than likely oil and gas and grain exports will continue as normal for the near term. 

Yet Dow Jones reports that Russian state-controlled natural gas giant OAO Gazprom said Tuesday there are "renewed concerns" that political and economic tensions between Russia and Ukraine could disrupt shipments of gas to Europe. Gazprom is currently locked in a dispute with Ukraine over prices and nonpayment of bills and has given the country a May 7 deadline to settle its arrears or move to advance payment for its gas. Continued nonpayment would result in a cut in gas flows for Ukraine, which could impact European customers, the company has said. Gazprom says Ukraine's gas debt will reach $3.5 billion in May. Gazprom supplies Europe with 30% of its gas, around half of which flows through Ukraine. Any disruption to those flows could have a significant impact on European customers, including utilities in Italy and Germany, and push up prices across the region."

Oil will also get its first look at oil inventories. Supply of oil is at an 83-year high in the United States and we should start to see gasoline supply start to build as refiners start to come out of maintence. If it were not for the Ukraine we would see oil substantially lower.

Natural Gas (NYMEX:HPM14) continues to rise. A combination of heating and cooling demand hitting at the same time in different parts of the country is making even the bear's start to question whether supply can get to full storage by the end of the season. We have been bullish and continue to be so.

The Fed has a two-day meeting. The IMF is warning the Fed to be aware of the impact that tightening policy might have on other countries. Gold is taking out some sanction fear premium as Russia laughs off the sanctions. 

 
About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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