The Commodities Feed: Russian gas flows to Finland stop | Snap


Energy

The tightening of the refined products market continues to support the oil market. ICE Brent managed to pull off a gain of just under 1% last week, leading it to settle above US$112/bbl. But despite the increasingly tight U.S. gasoline market, speculators have been reluctant to get into RBOB gasoline. RBOB’s speculative net buying increased just 4,080 lots in the last reporting week to 60,557 lots last Tuesday. This is still a far cry from the just over 80,000 lots seen in February and is significantly lower than the net record high of around 132,000 lots seen in 2018. This might lead some to think that speculators have plenty of room to push the gas market. even higher. However, as we have seen in the commodities complex in recent months, appetite is limited, not just from investors, but from market participants in general. This is evident when looking at overall open interest in gasoline, which has been at its lowest level in recent months since 2014.

The speculative positioning on ICE Brent also remains quite moderate. Speculators increased their net long position in ICE Brent by 23,801 lots in the last reporting week to 184,433 lots. This net long position is well below levels seen for much of 2021, and significantly lower than the record net long position of around 632,000 lots seen in 2018. This comes despite the oil market being much tighter. now than it was in 2018.

The rise in oil prices we are currently seeing should help ease market stress, through the destruction of near-term demand and stronger supply growth in the medium to long term. We have already seen demand growth forecasts for 2022 revised downwards due to the Covid-related lockdowns in China and the higher price environment. However, measures taken by governments – such as reducing fuel taxes and increasing fuel subsidies – are making it more difficult for the market to resolve its current tensions. Over the weekend, the Indian government announced that it would reduce retail sales taxes on petrol and diesel by INR 8/litre and INR 6/litre respectively in a bid to try to tame the inflation.

Finland saw its gas flows from Gazprom cut off over the weekend due to its refusal to pay for Russian gas in rubles or by opening an account at Gazprombank that would convert euros or dollars into rubles. The cut in supply was expected. And while Finland gets almost all of its natural gas from Russia, natural gas only accounts for around 5% of Finland’s energy consumption. Given the stoppage of Russian gas flows via the Imatra entry point, Finland will instead obtain supplies via the Balticconnector (gas pipeline connection between Finland and Estonia). Finland is the third EU country to see Russian gas flows halted, with flows from Poland and Bulgaria halted last month.

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