Written Commentary
CRUDE OIL
We are very surprised to see energy prices extend this week’s rally, as there is a plethora of negative fundamental items flowing in the marketplace. Certainly, the bulls are deriving some lift from signs of a weaker dollar, a positive global demand forecast from Russia for 2nd quarter 2021, from ongoing shuttered Gulf production, from Saudi comments stressing compliance from OPEC plus members and perhaps from hope of progress on a US stimulus package. However, the amount of anecdotal evidence of sagging demand, further concern for infection spreads (particularly in Europe/France), fresh projections that Chinese demand is set to slow following the surge in demand in June and July and finally from calculations on the massive amount of fuel backing up because of isolation.
NATURAL GAS
Not surprisingly, the natural gas market yesterday ranged down sharply and reached down to the lowest levels since early August in a fashion that suggests even more declines are ahead. In fact, the list of bearish forces operating in natural gas is extensive with US temperatures declining, the tropical storm threat eliminated for now and inventory levels rising by more than expected this week. Given this week’s decline in the face of news that Hurricane Sally shutdown 805 mcf of natural gas production (reportedly more than one quarter of all Gulf production), it is clear that the bull camp is on the run and the bear camp is very confident.
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