What In The World Is Going On With The Energy Markets?

WTI attempted to break through a pivotal resistance region between $82 to $83, and it failed miserably. Natural gas is getting whacked because weather models went from being bullish (hoping) to bearish.

I wish the energy markets were as easy as the two sentences I wrote above. We all know it's not as simple as that. In the case of oil, the confusing thing is that despite positive news over the weekend that China is relaxing more COVID restrictions, prices couldn't hold onto gains. It is important to note that many technical analysts are saying that if WTI can break above $82 to $83, a new bull trend would restart. We attempted to break that area 3 times and failed all 3, so one could postulate that this retest of the support is because of the rejection.

Looking at it from a fundamental angle, our reports last week should've explained to you why we are seeing the physical market weak. With Russia trying to export as much crude as possible before the price cap kicked in, Brent timespreads went from steep backwardation into contango. The current Brent 1-2 spread is barely hanging onto the backwardation, but if our analysis is correct, we should see backwardation return once the physical overhang dissipates.

And if we look at the global oil market from an oil inventory standpoint, we are still doing ok despite the bearish price action and worries over demand.