Written Commentary
CRUDE OIL
The oil market is moving from steady to slightly higher going into the US trading hours. This follows sharp gains in the previous session, with many of the bullish catalysts still intact. Geopolitical risks continue to swirl in the Red Sea region on comments that security is deteriorating, as well as Israel’s latest rejection of a ceasefire proposal with Hamas. Israel’s Prime Minister Netanyahu remains focused on a total victory against Hamas, and that stance was backed up with the latest bombing attacks in the southern border town of Rafah. An added source of support comes from reports that the US Energy Department is looking to acquire 3 million barrels as it continues to refill Strategic Petroleum Reserves. For now, the market appears to be discounting the negative factors, instead choosing to focus on a soft landing in the US economy and a tighter supply and demand balance forecasted for later in the year.
NATURAL GAS
The weakness continues in the market, with a drive into new low territory and below $1.82 overnight. Warmer than normal weather across many portions of the US the past few weeks has cut into heating and power plant demand, providing a negative for the market. In addition, US LNG exports are still restricted by a shutdown at the Freeport terminal that should last several more weeks, and the resulting additional domestic supply is also weighing on prices. There are increasing odds that a La Nina weather pattern will begin by late this year, which is seen as a force that could increase Atlantic hurricane risk.
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