The short-term trend of the energy markets has been on the upside for nearly a month now, but prices are approaching levels that have traditionally caused problems for rallies. The weekly chart below suggests that WTI may be able reach the falling trendline near $101/bbl without creating any appearance of excess, however, demand would then become a concern as rationing will eventually return
Our view of the oil markets is generally unchanged today from the outlook we made yesterday. Prices could continue higher over the next week or so, but we remain cautious about the ability of the rally being maintained.
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
Merry Christmas
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.
