Written Commentary
NATURAL GAS
With natural gas prices rebounding to the vicinity of 4-day highs yesterday in the face of news that China bought 30 cargoes of LNG for winter use highlights a market somewhat more sensitive to bullish developments. On the other hand, despite recent European daily injections failing to offset daily withdrawals, European strategic reserves remain close to record levels. In fact, Ukraine has even managed to fill its strategic storage to capacity. In another bearish development, European wind generated power has reportedly returned to normal seasonal levels and is currently providing nearly 15% of power needs to the continent. While the market has not injected premium from supply concerns associated with hurricanes, hurricanes this month have carved out a pattern of hooking to the north and into the middle of the Atlantic instead of tracking into the Gulf.
CRUDE OIL
Granted the crude oil market was significantly overdone on its charts and bullish sentiment was clearly becoming excessive with predictions of $100 per barrel pricing rife in the headlines but now the market has failed in the face of news that Cushing Oklahoma stocks are at 22.4 million barrels, a surprisingly large 5.2-million-barrel decline in API crude oil stocks yesterday and in the face of a very minimal decline in weekly European crude oil inventories. Therefore, bullish resiliency has moderated, and technical balancing setback mentality is in control early today. Not surprisingly, the United States Oil Fund ETF saw a sizable outflow yesterday which was probably the major force behind the recoil from the high yesterday. As indicated yesterday forecasts of $100 oil flow freely in the press with Goldman Sachs joining the fray overnight with the prediction predicated on “unprecedented demand levels worldwide”. In addition to extremely bullish sentiment predicting $100 oil, the trade is aggressively discounting any potential for a surprise US interest rate hike today. Furthermore, WTI prices have become very expensive relative to non-dollar priced crude oil. After the close, the API survey said that US crude oil stocks had a weekly decline of 5.25 million barrels which was a much larger decline than trade forecasts.
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