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Energy Demand Fears Return


We continue to view the set up in the crude oil market as negative, with demand fears given added impetus by the likely return to stringent UK lockdown rules, overnight chatter that China has temporarily slowed purchases for reserves, a slight increase in floating storage off Europe, further news that Libya will resume crude oil exports, a delayed restart in a large crude consuming US refinery (Port Arthur) and signs that the dollar has returned to an uptrend.


We are very surprised with the natural gas market’s ability to stand up against the trend of weakness in nearly all physical commodity markets especially against the washout in Petroleum prices. Apparently, the natural gas trade was caught leaning too far to the short side with lingering Gulf of Mexico production closures, a very active weather pattern in the Atlantic, a sharp jump in British wholesale gas prices this past weekend and talk of significant increases in US LNG exports next month.


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