Written Commentary
We suspect that crude oil prices are being held back this morning by fears that the Chinese recovery could be slowed in the event of sanctions levied by the US because of heavy handedness in Hong Kong. It is also possible that prices are somewhat undermined this morning as a result of chatter that price gains have begun to foster talk of Russia rolling back production cuts. Seeing the Russians potentially scroll back output restraint must be offset in kind by steady improvement in energy demand expectations from restart activity or prices will likely stall below the $35 level.
The natural gas market has benefited from a warm/hot shift in the US weather forecasts but prices have now returned to the vicinity of chart resistance around $2.00 and buyers could become anxious. However we suspect that natural gas was definitively oversold into last week’s lows (the specs continue to hold net short positioning), and therefore it is possible that a large portion of this week’s recovery has been classic short covering buying and not fresh fundamental buying. However restart activity should begin to lift electric generation demand ahead and give the bull camp some fundamental assistance.
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