Upside For Natural Gas Market
Overnight, the September crude oil market appears to have found psychological support at the $70.00 level and from news that crude oil storage in the European storage hub declined by 8.6% on a week over week basis which puts storage at the lowest level in early August since 2014 (Genscape weekly data). However, the market should be undermined because of growing activity restrictions in China (particularly Beijing) and from a 2nd price increase from Saudi Arabia for Asian customer purchases next month.
The ebb and flow of demand news for the gasoline market has come in on both sides of the equation, with favorable Indian fuel demand stories countervailed by reports of renewed activity restrictions in China. Furthermore, if China reduces fuel consumption dramatically, that could result in China becoming an aggressive exporter of gasoline and diesel.
With the natural gas market breaking out of a sideways consolidation pattern to the upside from the last 3 weeks action this morning, ongoing strength in Asian LNG prices, hotter US and North Asia temperature forecasts and strong July imports by South Korea and Brazil from the US, the upside is justified by fundamental storylines. Furthermore, European gas storage levels remain tight.
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