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Natural Gas Sharply Lower Yesterday

NATURAL GAS

Natural gas was sharply lower yesterday and again overnight, as recent weather forecasts have moderated a bit from the extremely cold outlooks late last week. The updated 8-14-day forecast still has below normal temperatures across most of the continental US, but the 6-10 day has shifted a bit warmer, though still unseasonably cold. We expect a sharp increase in natural gas usage next week, but the moderation in temperatures should put less pressure on demand. US LNG exports are still constrained by the Freeport terminal shutdown, but there is some optimism that operations will resume over the next few weeks. The EIA raised this year’s US natural gas production forecast to a record 98.07 bcf/per day, but it also raised the 2022 domestic consumption forecast to a record 88.39 bcf per day. December natural gas has blown through support and is back inside its trading range from the second half of October.

range gas

CRUDE OIL

Crude oil has extended this week’s pullback and has found additional pressure from a negative shift in global risk sentiment, but global demand concern remains the front and center issue. News that Chinese Covid cases saw their largest 1-day increase since April weighed particularly hard on crude oil yesterday on ideas it would further push back their Covid reopening and reduce crude oil imports. Comments from a Bank of England official that the UK is entering a recession also pressured energy prices on ideas it would hurt European demand. In their earnings update, Diamondback Energy said that the US shale industry will continue to struggle with expanding production due to high costs. While the latest Baker Hughes US oil rig count (613 rigs) was the highest since March 2020, there has only been a net increase of 18 rigs since the start of July. One of the key readings from today’s weekly EIA report will be US crude oil production, which has held between 11.9 and 12.1 million bpd since mid-May. The EIA has lowered its 2023 world crude oil demand growth forecast by 320,000 barrels per day (bpd), down to 1.16 million bpd, but it has also raised the 2022 demand growth forecast by 140,000 bpd to 2.26 million. After the close yesterday the API survey showed US crude oil stocks increasing 5.62 million barrels last week, which was much larger than expected.

 

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