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Nat Gas Demand Concern

NATURAL GAS

While the natural gas market is not usually tightly linked with the ebb and flow of US economic data, rising concern of slowing in the US economy and very disappointing industrial & manufacturing activity readings posted this week are demand concern for natural gas. Not surprisingly the natural gas market came under pressure following a larger than expected injection into weekly storage. The weekly natural gas storage report showed an injection of 60 bcf. Total storage stands at 3,833 bcf or 5.6% above the 5-year average. Over the last four weeks, natural gas storage has increased 207 bcf. In retrospect, the surplus to the five-year average continued to narrow but see that as a tempering of a bearish factor not a bullish development yet. The prospect of fresh contract lows are high.

gas stove

CRUDE OIL

While the gasoline market did not make a lower low for the move overnight prices are just above a downside breakout level this morning and may have found some thin value at the $2.10 level. While there is the prospect of a jump in US demand in the coming week from what is expected to be a very active US driving holiday those purchases have already been made in the marketing channel and the trade is already assuming robust demand. Not surprisingly, the gasoline market also washed out and fell to the lowest level since the middle of summer, because of sagging US demand fears and the bear camp is emboldened by a series of chart failures. While gasoline will follow crude oil lower the magnitude of the decline’s gasoline should be less than in crude oil as US implied gasoline demand has held together impressively and EIA gasoline inventories over the last two weeks and have cut the year-over-year surplus by more than half over the last three weeks. However, last week’s 9.492 million barrel per day implied gasoline demand reading was likely a statistical anomaly and therefore demand might not be as strong as published. Like the gasoline market, the diesel market also showed less aggressive liquidation than in the crude oil market, but further large declines in crude will likely drag diesel down to the November low of $2.6960. However, diesel stocks at the European storage hub have reached their lowest seasonal level since 2008 with similar seasonal tightness in the US.

 

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