Yesterday, prices in the US and Europe saw a significant surge, with natural gas leading the charge. Henry Hub experienced a 9.4% increase, surpassing $2.90/MMBtu fueled by colder weather and short covering. In contrast, oil prices continued to face downward pressure, with ICE settling almost 2.8% lower at below $72/bbl.
The USD’s strength, a prevailing theme post-US election, has not only impacted the oil market but also the broader commodities complex. Additionally, prompt time spreads for Brent and WTI have narrowed, hinting at a better-supplied physical market. Our projections indicate an oil surplus through 2025, assuming OPEC+ unwinds cuts as planned and Iranian export volumes remain stable.
OPEC is set to release its monthly oil market report today, potentially revising demand forecasts. Despite last month’s cuts, the group maintains an aggressive demand growth estimate of 1.93m b/d this year and 1.74m b/d in 2023, higher than other estimates.
Meanwhile, iron ore slipped back to $100/t following Beijing’s stimulus efforts focusing on property inventories rather than new starts. China’s iron ore port inventories have risen to their highest level since early September, indicating continued pressure on prices.
Analysis:
The energy market is experiencing a significant shift, with natural gas prices surging while oil prices weaken. Factors such as colder weather, short covering, and USD strength are influencing these trends. OPEC’s upcoming report and China’s stimulus measures will be crucial in determining future market movements. Investors should closely monitor these developments to make informed decisions regarding their portfolios.