Written Commentary
NATURAL GAS
While the natural gas market managed to reject a return to contract lows last week, very mild US and European temperatures throughout the coming week should push down heating degree days and throttle natural gas prices downward. In another bearish development US supply is likely to backup onshore after a Freeport LNG export facility saw damage from extreme cold especially with the company indicating it could take as long as one month to repair the facility. Furthermore, the natural gas spec short was probably lowered slightly given last week’s bounce. This week’s Baker Hughes oil rig drilling counts showed one less gas rig operating than last week with the total at 119. In another example of a US politician acting without thinking of repercussions, there is a proposed ordinance in Chicago banning the use of gas for heating and cooking in newly constructed buildings. It should be noted that Chicago/Illinois continue to get power from coal fired generating facilities which means a reduction in the use of a relatively cleaner energy source in favor of a very dirty fuel source.
CRUDE OIL
With an attack on an oil tanker in the Red Sea, the first US casualties, an 18% decline in weekly crude oil in floating storage, reports of a 1.1% year-over-year increase in Indian December crude oil imports, and perhaps most significantly increasing involvement of Iran the latest new high for the move in crude oil is fully justified. In another “feather ruffling” development, Nancy Pelosi from the US House of Representatives indicated an investigation of pro-Palestinian protests in the US should be investigated by the FBI for Russian collusion. The Congresswoman indicated protest funding channels needed to be investigated for signs of Russian financing. From a technical perspective, the upside extension and new high for the move today leaves the bull camp in control, especially with the net spec and fund long positioning in crude remains very modest. The weekly Baker Hughes rig report showed an increase in activity for a second straight week with the addition of two oil rigs, bringing the total rig operating count to 499. It should be noted that US refinery maintenance is surfacing, and a German refinery was shut down at the end of last week which could stem the recent sharp declines in EIA oil inventories.
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