Written Commentary
NATURAL GAS
The failure yesterday in natural gas futures aligns with what continues to be very bearish fundamentals. In fact, US supply fundamentals worsened considerably this week with another large jump in US inventories relative to five-year average seasonal levels. The weekly natural gas storage report showed a small draw of 40 bcf. Total storage stands at 2,334 bcf or 30.9% above the 5-year average. Over the last four weeks, natural gas storage has declined 250 bcf. While news that Chinese January and February coal imports jumped 23% above year ago levels foments hope for a recovering Chinese economy, that large inflow likely reduced natural gas/LNG import interest.
CRUDE OIL
Seeing crude oil prices chopping within a four dollar trading range over the last several weeks is justified given mixed opinions on global supply. Yesterday, the IEA indicated they saw the world oil market “well supplied” for this year, while another entity overnight is predicting $90 per barrel oil in the third quarter because they expect the world oil market to tighten over the next six months. Therefore, both the bull and bear camps are set to leave this week disappointed in crude oil market action. The market disappointed the bulls early in the week when a broad improvement in energy demand prospects, signs of positive Chinese January and February oil imports and a smaller than expected inflow to EIA crude oil stocks failed to sustain prices near the prior week’s highs. However, some in the trade interpreted the Chinese oil import data in a slightly bearish light with suggestions that a “softer trend” in import demand remained in place. Unfortunately for the bear camp, the very bearish statement from the IEA regarding a “well supplied” global market failed to damage what has become a credible consolidation low level on the charts at $78.00. It goes without saying that a softening US data pattern into today’s primary monthly jobs report (US nonfarm payrolls) has thickened resistance over crude oil pricing as US demand concerns could expand without a noted increase in the probability of a US rate cut.
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