Written Commentary
NATURAL GAS
With estimates calling for moderate injections into this week’s EIA storage, the shoulder season virtually ending heating demand and fresh damage on the charts, the bear camp retains control. Obviously, significant declines ahead could result in an aggressively oversold net spec and fund short position, but without US gas exports returning to capacity flow, supply in the US is likely to remain a heavy burden on prices.
CRUDE OIL
While the crude oil market has managed to discount a much larger than expected jump in API crude oil stocks of 4.09 million barrels yesterday afternoon, a surging Dollar, persistent weakness in equities and ongoing hawkish US Federal Reserve dialogue should leave energy prices under modest pressure. In fact, short-term technical signals like stochastics and RSI are in sell modes despite the potential an explosive recovery out of nowhere from any launch of an Israeli attack of Iran assets. While the US Treasury Secretary suggested sanctions against Iran were possible and with Congressional leaders considering sanctions, there is a fresh supply supportive theme in the markets. However, political analysts suggest the Biden Administration will not block Iranian oil exports as that would push up US retail pump prices even further. According to some sources, Iran has increased his daily production by 20% over the last two years and has raised its global supply share to 3.3% from 1.5% in 2022 which means Iranian supply is very important to the global oil market. On the other hand, Iranian exports are reported to be 1.5 million barrels per day and with sanctions proving largely ineffective against Russia, supply shocks from US sanctions are unlikely to discourage China from buying Iranian oil. In a longer-term bullish story, German 2023 oil production declined by 5.9% and gas output fell by 10.4% in what is very likely the result of the Green Movement.
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