Russian troops are amassing on the Ukraine border and Russian President Vladimir Putin threatens sanctions against the West.
Crude oil (NYMEX:CLU14) and stocks dive as Russian threats drive fears of an economic slowdown in Europe and across the globe. Yet better than expected refinery runs in The American Petroleum Institute Report may indicate slightly better demand than we thought giving some support to a wobbly oil and product market yet reports that the Saudi Arabia's national oil company has cut the official selling price for crude oil sold to Asian buyers for September is signally weak refining margins and soft demand.
Dow Jones says that Saudi Aramco cut the official selling price for all oil grades, but the sharpest cuts were in the light grades of crude oil that are used to produce clean fuels like gasoline and naphtha, a petroleum product used to make chemicals and plastics. The cuts reflect a sharp decline in naphtha and gasoline margins and a global overhang in lighter grade oil.
Yet the main focus is still on Russia Ukraine tensions and the market is trying to decide what is more bearish, Russian troops build up on the Ukraine Border or the threat of "tit for tat" sanctions on Europe and the United States by Russia.
Concerns by Poland and other Western Powers are worried that the war games played by Putin may be a precursor to a real invasion. The Financial Times reports that while the number of Russian troops is still well below the 40,000 Russian troops deployed near Ukraine in April, the sharp rise in just a few days has been a cause for significant concern among Western military powers. Yet the market also sold off after Putin ordered his government to prepare retaliatory measures against U.S. and European sanctions. The Wall Street Journal reported that Russia's Vedomosti newspaper reported Tuesday that the government was considering a partial or total ban on overflights of Siberia by European airlines, which use the route to shorten trips from Europe to Asia. Government officials declined to comment on the report, however.
Yet the API slowed the selloff as a jump in refinery runs led to a 5.5 million barrel crude oil drawdown. The recent drop in retail gas prices has spurred a demand renaissance all of a sudden helping gas supply to drop by 3.6 million barrels. Distillates stockpiles were also down by 500,000 barrels. Yet refining issues are still in play. Maintence planned and otherwise may make it hard to keep up these run rates.
Natural gas (NYMEX:NGU14) got a bounce from a return of summer on the East Coast. Hurricane Bertha may head towards Europe. The Independent says that Hurricane Bertha began heading north and then east after gaining momentum in the Bahamas yesterday and could hit the UK. According to the National Hurricane Center in the United States, it is expected to grow in size before becoming a post-tropical cyclone with winds of up to 73mph, reaching Ireland on Saturday night. The Met Office has said, however, that its definite course is still unknown--berthahypotheses include Bertha heading towards France "as a weak feature which will completely miss the UK, to its arriving as a fairly active summer storm. Bertha may not go quietly after all.