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Sharp Range Down Failure in Nat Gas

NATURAL GAS

Clearly, support from the Australian LNG plant workers strike and hotter US temperatures next week has lost its capacity to support natural gas prices. In retrospect, the gas trade basically discounted a rise in Chinese electricity generation last week and ignored signs of strong Chinese LNG consumption. However, increasing German, European, and Japanese LNG in storage should leave the bear camp confident. Not surprisingly, the natural gas market saw a sharp range down failure yesterday, perhaps partly because of a slight week over week gain in LNG floating storage. On the other hand, Chinese LNG imports on the week returned to the highest levels of the year with a week over week gain of 2%. This week’s Reuters poll projects EIA working gas in storage to increase by 29 bcf to 39 bcf. The path of least resistance is down as demand prospects do not offer up chances for a buying spree by the utilities.

gas stove burning

CRUDE OIL

While crude oil has respected yesterday’s spike low, energy demand expectations remain concerning, short-term technical signals remain in sell mode and slumping Chinese energy demand fears remain in place. On the other hand, API crude oil stocks yesterday afternoon fell by a very significant 6.1 million barrels, direct Saudi Arabia crude burn rose in June, Saudi crude output in June fell and perhaps most importantly Saudi crude oil exports also declined. Other supportive overnight developments came from a week over week decline in global floating crude oil storage and a decline in Cushing Oklahoma crude oil inventories. Unfortunately for the bull camp, China continues to show signs of increasing oil imports from Iran which reduces interest in other global supply. After starting out choppy yesterday, oil prices gathered downside momentum and fell sharply with traders likely shaping disappointing Chinese economic data into softer energy demand prospects. This week’s Reuters poll projects EIA crude oil inventories are likely to increase by 2.1 million barrels with an increase in the US refinery operating rate of 0.5%. Last week, EIA crude oil stocks surprised with a massive build which resulted in a minimal expansion of the year-over-year stock surplus. On the other hand, the surprise build in EIA crude oil stocks last week might have been a balancing of a record weekly decline in EIA crude oil stocks of 17 million barrels from the week before. After the close, the API survey said that US crude oil stocks had a weekly decline of 6.195 million barrels which was a much larger decline than trade forecasts.

 

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