Energy Prices Look to Slide Lower
Obviously, hope for improving Chinese energy demand has been called into question at the same time physical commodity markets overall are coming under macroeconomic pressure from the prospect of even higher US interest rates and further gains in the US dollar. Clearly, the catalyst for the sharp reversal of the prior 24 hours of trade was the lower Chinese growth forecast but fear of further headwinds for the global economic recovery from higher global interest rates should also leave the bear camp with an edge today.
Just as in the crude oil market yesterday, gasoline prices forged a major trading range with a new high for the move aggressively rejected in a fashion that fosters talk of a blowoff top! In fact, we see the gasoline market significantly overbought from the last 3 weeks’ rally of nearly $0.30 especially with the most recent (but still delayed) COT report net spec and fund long reading of 72,872 contracts. In fact, from the last COT positioning report into the high yesterday gasoline prices had also rallied $0.12 which probably puts the net spec and fund long position near the highest levels since January 2021. Supporting gasoline going forward are stories from Asia indicating tightness likely associated with a pre-existing deficit and a reduction in fuel exports from China will keep crack margins strong.
All things considered, the strength in the natural gas market yesterday was impressive considering EIA forecasts released yesterday projecting US first quarter 2023 natural gas consumption will be the lowest first quarter since 2018. However, lower US consumption is probably largely attributable to a mild winter as opposed to a slowing US economy. Furthermore, the EIA also upwardly revised their 2023 dry natural gas production higher from 100.27 bcf/day to 100.67 bcf/day and that combined with a slightly burdensome overall storage reading should leave the bear camp confident.
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