Written Commentary
NATURAL GAS
With cold temperatures moderating in the UK, daily gas flow to LNG export positions falling, US production increasing, normalizing US seasonal temperatures and futures contract expiration the bear camp has regained near term control. On the other hand, analysts still expect US gas exports to post a fresh monthly record which follows a fresh record in the prior month and that combined with lingering cold in US Western states could cushion natural gas against an aggressive bearish reaction from today’s EIA working gas in storage weekly report. However, the previous EIA working gas in storage readings were holding significantly above last year and both France and the EU continue to make progress in refilling their strategic inventories. On the other hand, there is the potential that the below normal seasonal temperatures over the last 2 weeks in the US could surprise with a small injection and that could cushion the market against what appears to be a shift down in trend. In conclusion, we see both fundamental and technical forces propelling prices lower, especially with the market yesterday falling below the top of a previous gap.
Burning gas burner. Blue fire with a red flame.
CRUDE OIL
With crude oil posting a lower low this morning in the face of evidence of very strong Indian crude oil imports, a significant jump in US implied gasoline demand and talk of a possible Chinese government stimulus for its export sector and college grads, the prevailing trend in the crude oil market remains negative. Certainly, crude prices managed to bounce on a larger than expected decline in weekly EIA crude oil stocks and saw a measure of positive reaction to strong US implied gasoline demand figures, but that bias has been reversed this morning. Seeing Iraq promise to end technical shipping delays as soon as possible could return 400,000 to 500,000 barrels per day to world oil flows, but many tankers have left the area which will impede any quick resumption of exports. In a slightly bullish development, WTI crude oil prices posted a premium verses Brent crude oil for the first time since the end of January in a possible sign that the trade has moderated its very bearish oversupply views for US oil. However, Bloomberg overnight has indicated bearish sentiment from the options trade continues to expand, Chinese corporate profits question the pace of the Chinese recovery, and the trade is realizing the Russian price cap is of no impact in Asia. On the other hand, the latest road traffic index from Bloomberg indicates 15 cities in China with the most registered vehicles increased again by 2.6%. From a fundamental/demand perspective, ongoing upbeat energy demand prospects from India and China should increase fundamental support under the market, but tight US gasoline supplies in the face of large gasoline imports flow from Europe probably indicate US gas demand is good.
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