- Natural gas Tips For Today: BUY NaturalGas CMP 206- 207 TARGET 212—220—234 (INTRADAY+POSITIONAL)
Energy markets have managed to avoid the recent weakness seen in equity markets. For oil, there are signs of stronger demand, while for the European natural gas market, there are concerns following recent developments in France related to strike action and nuclear outages.
Energy – European gas prices surge
The oil market has continued to move higher in early morning trading today, following a strong close at the end of last week. ICE Brent settled almost 1.5% higher on Friday. The strength in the market comes despite the continued weakness we have seen in equities given concerns over SVB and the broader banking sector. Instead, the market seems focused on a somewhat positive demand picture for oil, while more recently, expectations for Fed tightening have also fallen.
The more positive demand picture is being driven by reports of some strong buying from China and this also ties in with the move that we have seen in the Brent-Dubai spread, which continues to narrow. This makes sense given the demand recovery that is expected not only from China but broader Asia following a relaxation in China’s Covid policy late last year.
The latest positioning data shows that speculators increased their net long in ICE Brent by 12,291 lots over the last reporting week to 298,291 lots as of last Tuesday. This move was driven exclusively by fresh buying, rather than short covering. But although we saw buying coming through for Brent, NYMEX WTI saw speculators reduce their net longs by 26,959 lots to 164,292 lots. The more bearish positioning in WTI shouldn’t be too surprising, given the scale of inventory builds that we have seen in the US so far this year.
European natural gas prices rallied significantly towards the end of last week. TTF was up around 25% over Thursday and Friday, which has taken the market back above EUR50/MWh. There are several catalysts for the move higher, including ongoing strike action in France which is affecting operations at 4 LNG import terminals. Also in France, EDF discovered some defects at two of its nuclear reactors, which has led to them being halted. And finally, these concerns are coinciding with a cold snap across large parts of Europe. However, for now, EU gas storage is still comfortable at about 56% full, well above the 5-year average of 36% full for this time of year.
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