NATURAL GAS
With a fresh downside breakout in natural gas overnight combined with a study projecting a “new wave of LNG supply growth” and given record warmth throughout the US, the potential for new contract lows is very high. While the natural gas trade was presented with two very bullish longer-term demand stories yesterday, the near-term track in gas prices remains down. Like the petroleum markets, the US is seeing strong demand for LNG export supply, but with US export flows already at capacity, there is little potential to drawdown US supplies particularly with much above normal temperatures.
CRUDE OIL
While the crude oil market has held the February gains, the market clearly lost upside momentum over the last three weeks. In fact, the lack of a material supply disruption in the Red Sea has contributed to the “stall” in crude oil prices, and crude prices may have lost their bullish buzz because of the consistent erosion of US rate cut hopes and lingering concerns of large inflows to US EIA crude oil inventories. However, the dollar continues to erode, the US continues to refill its strategic reserves, global refiners have indicated they will delay maintenance due to strong product demand and healthy margins, the Russians have announced a six-month ban on gasoline exports and Europe has indicated they may provide direct military support for Ukraine. It is also possible that a precipitous drop in US durable goods could deflate energy demand expectations today and the threat of a significant inflow to EIA crude oil inventories on Wednesday is justified by four straight weeks of inflows with at least one of those inflows historically large. In a minimally supportive development traders have suggested OPEC plus will roll over its production restraint, but that bullish force is not significant anymore.
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