Written Commentary
CRUDE OIL
Apparently, the fear of softening energy demand has been stoked by surging interest rates this week. Furthermore, overnight suggestions that precipitous ongoing price declines could prompt OPEC+ to extend and even expand production restraint have been tossed aside for now. Clearly, a moderate portion of this week’s setback in prices are the result of the trade factoring in softening demand, but rising rate fears and adverse currency market action presents a broad bear case. In fact, J.P. Morgan indicated that demand destruction from high prices was already underway and indicated that wealthy individuals are paying 6% of their income for energy, and we suspect a much larger percentage of income dedicated to energy needs is impacting lower incomes.
NATURAL GAS
While we remain suspicious of the current rally because of the argument that yesterday’s injection of 86 BCF was below expectations of 92 BCF, one should not argue with the results. The primary price lift has been the result of softening of US production. However, seeing October production softer than September is not surprising considering August and September production readings were both around record levels.
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