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Energies Need Fresh Demand Evidence

CRUDE OIL

Given the brunt of overnight fundamental news flow we would have expected oil prices to have been tracking sharply lower today. In addition to another higher high in the dollar, the markets are faced with bearish prices predictions from the International Energy Agency and OPEC. The International energy agency expects global production in the November/December timeframe to increase by 1.5 million barrels per day and they have forecasted the “end” of the energy rally.

In a surprising development, the January RBOB gasoline contract did not forge a lower low for the move yesterday as was seen in crude oil and diesel markets. Furthermore, the January gasoline contract this morning has posted a 4-day high and regained the psychologically important $2.30 level on the charts.

NATURAL GAS

We are very surprised to see January natural gas make a 5-day high in the early going today especially following reports that global LNG floating supply increased by 14% on the week, but also because of significant declines in coal prices inside China. However, British wholesale gas prices for delivery next week jumped by nearly 10% and there are projections overnight of European blackouts this winter because of supply shortages. There are conflicting reports as to whether Russian gas is flowing.

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