Written Commentary
NATURAL GAS
We think the bull camp should have seen a noted benefit from news that the Australian natural gas workers strike from last Friday could continue into a tribunal meeting 10 days from now. In another sign of a lack of bullish interest, gas prices this morning have not managed gains despite Bloomberg reports that the Chinese state owned Unipec company has started to purchase gas for winter supply. However, European industrial gas usage is expected to be 20% below 2021 this year and could be lower if European economic activity slows. Unfortunately for the bull camp reports that storage in Europe is at 94% of capacity clearly confirms stock building was undertaken significantly ahead of normal refill timing. While the bull camp in crude oil generally retains control the crude oil market appeared to have lost bullish momentum yesterday. However, crude oil has managed an upside breakout which extends bullish sentiment into another trading session.
CRUDE OIL
With a fresh higher high/upside breakout in October crude oil this morning the bull camp has extended its control. Obviously, tight supply dominates the bull case with a minor assist from recent dollar weakness. Therefore, further gains in crude oil prices are likely with the market riding on the back of gasoline and diesel. Limited bearish developments overnight include the US and Iran agreeing to a prisoner swap which shows cooperation potentially leading to a nuclear deal which could result in Iran managing to get out from under some sanctions and from the reopening of eastern Libyan oil ports following recent storm closure. If open interest had declined instead of expanded on the recent loss of upside momentum, we might be more inclined to pick a top, but global supply tightness is not easily or quickly remedied. However, with the net spec and fund long positioning in crude (adjusted for the gains made after the report was released) likely at the highest level of this year. Therefore, the crude oil market is already nearing overbought status.
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