FXTM information and reviews
FXTM
93%
IronFX information and reviews
IronFX
92%
Libertex information and reviews
Libertex
91%
FXCC information and reviews
FXCC
90%
Markets.com information and reviews
Markets.com
89%
FxPro information and reviews
FxPro
88%

Natural Gas is in the middle of a perfect storm


10 February 2020

Concerns about the influence of the Chinese coronavirus returned to the markets at the end of last week. The focus was on forecasts of a slowdown in China’s economy and in the global economy as a whole due to restrictions on movement in China and long vacations on factories in some Chinese provinces, which damaged the established supply chains around the world.

Particularly worrisome is the news of a 60 per cent drop in rail traffic in China during the holidays, as well as a decline in air travel. All this leads to fears of lower demand for energy.

The impact of coronavirus can be considered as the short-term factor for markets, as plants in China are already returning to work. But for Gas, two longer-term trends remain valid.

The cost of Gas broke through the “bottom” of January at the beginning of trading on Monday, declining below $1.83 MMBtu on the New York Mercantile Exchange. The quotes were below only during the three weeks at the start of 2016, when Brent had fallen below $30, almost twice below its current quotes.

OPEC, led by Saudi Arabia, regularly tries to save oil prices from falling. But the gas market, untouched by this strategy, had failed to avoid a historic slump, as an unusually warm winter in Europe also suppressed demand for Nat Gas. The recent cooling is unlikely to change consumption dramatically in the coming months.

An even longer-term factor is US expansion in the energy market. In recent years, the U.S. has not only become the world leader in oil production but also increased Natural Gas production. Now the Administration of the US president is actively working on forming markets for these commodities as trade negotiations with the EU and China almost invariably include demands to increase oil and LNG imports. Besides, the Americans are throwing sand in the wheels of large-scale energy projects in Russia, such as Nord Stream-2, and before that – to TurkStream.

Since 2016, Russia adhered to Saudi Arabia’s strategy of cutting supply to maintain Crude prices. However, the meeting last week showed cracks between these frenemies. The roads of Russia and OPEC would diverge as the former refused to ratify further oil quota cuts by 600 BPD.

Changing a course in Russia may be a signal to the entire energy market. Russia may be switching from fighting for the prices to battle for market share. The country has room for manoeuvre, as the average cost of oil production in Russia is lower than in the US, and long-term gas supply contracts can survive a severe drop in spot prices.

All this sounds like an alarming forecast for oil and gas prices in the near term. It may well turn out that Oil and Natural Gas prices are still searching for their bottom with the most adjacent oil and gas targets 10% below the current quotations. Further decline may bring Gas prices back to their lows of the 2016 and Oil to its lowest at the end of 2018. However, this is unlikely to be the end of the battle for the market. Worryingly, it may be just the beginning of a period of extreme volatility in the energy market.

#source

Related

US Markets lost major support, Asian Indices are melting
US Markets lost major support, Asian Indices are melting

Global markets closed last week on the back foot, and no significant positive factors emerged in Asian trading, increasing the flight to safety. The Hang Seng lost...

20 Sep 2021

US Retail sales and other data has supported Dollar
US Retail sales and other data has supported Dollar

The US Retail sales notably exceeded expectations, adding 0.7% in August vs an expected 0.7% decline. The increase to August last year is an impressive 14.9%...

17 Sep 2021

Geopolitics Fire Up Up and Cryptos Are Booming
Geopolitics Fire Up Up and Cryptos Are Booming

Futures in the United States and Europe are trading lower today as investors are worried about the new security agreement between the U.S., the U.K. and Australia...

16 Sep 2021

UK inflation surges, stocks struggle
UK inflation surges, stocks struggle

European markets flat at the open this morning as UK inflation surged to a record high in August and Chinese economic data was soft. China’s retail sales fell to...

15 Sep 2021

Gold is anxiously waiting for the US inflation data
Gold is anxiously waiting for the US inflation data

Gold, hovering around $1790 since last Thursday, might take an even harder hit. The bears are waiting for a good signal to launch an attack. It is now holding it below significant levels...

14 Sep 2021

Here Is Why Stock Futures Are Trading Lower
Here Is Why Stock Futures Are Trading Lower

Despite a week of doom and gloom in the stock markets, futures in the United States are still trading lower. Since February, the S&P 500 has been on its longest...

13 Sep 2021


Editors' Picks

OctaFX information and reviews
OctaFX
86%
HotForex information and reviews
HotForex
85%
XM information and reviews
XM
80%
FXCM information and reviews
FXCM
79%
Vantage FX information and reviews
Vantage FX
78%
Moneta Markets information and reviews
Moneta Markets
77%

© 2006-2021 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.