Natural Gas traded lower, settling $3.233 down $0.118 (3.9%). The curve was weaker, 13/16 down $0.05, J13/V13 $0.02 weaker, V13/F13 out $0.01. Hub cash was firmer, ~$0.03 back this morning, Z-6 fell to $9.80 from $16.88 Monday.
Oil prices could continue higher over the next week or so, but we’re cautious about the possibility that yesterday’s rally has difficulty being maintained. The market may gain support from signs of improved economic conditions following PMI data in China and the U.S., the breakout in S&Ps to 2 1/2 month highs, signs of fund buying in COT data, and the military exercises being conducted by Iran
2013 Energy Outlook – Despite the relatively sideways trading range and declining volatility that the last few months of 2012 has brought the oil markets, underlying developments have remained fairly dynamic. The November election in the U.S. and change of power in China
Monday’s trade fell sharply and in stark contrast to the strong rally that was witnessed on Thursday. The focus was on forecasts for temperatures that did not show any more cold than what was seen on Friday, and actually warmed slightly.
The sharp drop in energy markets on Friday was a demonstration of the influence that economic issues in Washington can exert on oil prices. Near-term trading direction will thus be influenced one way or the other by what happens with fiscal cliff negotiations over the weekend and between the Christmas and New Year’s holidays
It’s difficult to say that yesterday’s rally and breakout above the 50-day MA in WTI and Brent will create an environment of bullish euphoria in the near-term, because the same conditions have played themselves out several times in the last two months.
Natural Gas traded higher settling $3.418 up $0.06 1.8%. The curve was weaker, 13/16 down $0.08 (16-20 up btwn $0.08-$0.13). Hub cash was firmer, ~$0.08 back this morning, Z-6 up $0.15 to $3.55. The 12z was warmer Midwest and South and much cooler West Coast/Plains during the 6-10 day.
Daily Energy Report – The oil markets may trade higher again in the near-term, however, the fundamental picture still remains somewhat weak at the moment.
Oil markets may continue their sideways trend this week, as the trade continues to face pressure from a lack of progress on the fiscal cliff. Background pressure will remain in effect from growing domestic oil production, elevated oil inventories, and last week’s hold at the 50-day moving averages in Brent and WTI.
Oil prices created an inside-day in WTI yesterday and both Brent and WTI again had trouble with their 50-day moving averages. Those technicals may offer pressure again in today’s trade, where the market will also be weighed down by continued growth in U.S. oil production, growth in oil stocks, building gasoline inventories, and generally weak demand.
