Oil commentary - 28 April 2022

Morning all. Fersssday. Brent is trading this morning at $105.00 down 0.32 and WTi trading at $101.80 down 0.22.?You know, the only person I think who should be trading this market right now is Claudio Ranieri. Why The Tinkerman I hear you ask? Well, in the 2015-2016 English Premier League season he managed to guide Leicester City to become champions.?The world stood back in awe and didn't quite know what to do. It seems like the oil market doesn't know quite what to do right now, stuck between concerns about supply disruptions from Russia and demand coming lower in China and the rest of the world because of spiralling inflation. My favourite Claudio quote of all time by the way, “Football managers are like a parachutist. At times it doesn’t open. Here, it is an umbrella. You understand, Mary Poppins?”.?Yes Claudio, yes, we understand. I was thinking this morning about quite what state the world is in right now, and no, it's not all bad. Let's split it up by region and be monosyllabic in summary. Europe - broken. North America - blinkers. Middle East - booming. Asia - struggling. Antipodes - welcoming. South America - chilling? Now, I am not in the business of offending anyone, what, me? No, seriously, I am not. My aim on this medium is to create debate, think about what is happening in the world and thus what may or may not happen to the price of oil and the energy complex in general. But 2022 has proved extremely difficult to form a cohesive argument about the state of the oil market because just how fractured the world has become. Hence why I summarise the parts of the globe above. Crude prices are lower yet refining margins for diesel at an all-time high. What does that tell us? Fuel oil used as a substitute for LNG in Asia hits record high. Again, what does this tell us? There are myriad stories along the same lines, but these are two that stood out to me. I would argue the answer to the first one is that simply crude oil has been in most Wall St funds for a while now and crude is merely following the general risk off attitude equities have faced the last few days. From a physical point of view products are stronger than ever. The second question - now this is the important one to look at. Are LNG cargoes being diverted to Europe based on the fact that those EU countries will pay what they have to, when they have to in order to replace Russian gas??I'd argue yes. And there we come back to the BTU crisis we were in around Q4 last year. All of this means one thing - higher prices for the end user.?The inflation, and hence recession argument, grows stronger every day, but with tensions in Ukraine seemingly increasing, even Claudio himself may have trouble tinkering this one. Good day.?