Written Commentary
NATURAL GAS
The never-ending slide in natural gas prices continues and we see little near-term prospect for the market to reverse today. Apparently, a restart of the Freeport LNG export facility is looming according to statements from inside the company. However, rumors regarding the status of the export facility have been rampant and have been consistently wrong. On the other hand, the net spec and fund short in natural gas has likely entered extreme territory which could result in a significant short covering bounce if rumors of the Freeport export restart are confirmed with actual shipments. Unfortunately for the bull camp, the markets are not expecting a large withdrawal from EIA working gas in storage today and with the market recently regained surplus to the 5-year average stock levels the bear camp has the edge. We see no major catalyst suggesting the downtrend has run its course. Weather forecasts continue to track normal temperatures for January, with only temporary cold surfacing. Without a much larger than expected withdrawal from EIA storage and very conclusive upbeat US data the bear camp retains the edge.
CRUDE OIL
Fortunately for the bull camp, the setback from this week’s highs should mitigate pressure from modest disappointment in today’s US scheduled data. Supporting prices into the key data window is word of the strongest Indian oil product consumption in December over the last 9 months. It should also be noted that the trade was presented with an overnight analyst projection of growth in 2023 demand of 1.7 million barrels per day. However, that supportive news is countervailed by headline evidence that Indian December crude oil imports declined slightly on a year over year comparison. Furthermore, seeing Russia moving to “transfer” Urals supply at sea is a development that could reduce punishment from Western price limits and increase supply flow from Russia. Seeing March crude oil reject the range down attempt was probably the result of statements from the Chinese Center for Disease Control indicating infections are now down 72% from their peak. However, the Chinese agency also projected significant infection readings in rural areas ahead after holiday travel brought the infections to smaller towns and villages. Another negative facing crude oil today stems from a large jump in Cushing oil inventories as that prompted global traders to turn bearish toward WTI prices relative to Brent. Overall energy market demand concerns are credence from another week of soft gasoline and distillate implied demand readings.
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