Gas and oil under pressure amid recession and demand concerns
Gas prices in the US continue to move lower after buyers failed to break above key resistance at 47.00 level again yesterday. Yesterday's EIA report showed a 50 billion cubic foot decline, which was a larger-than-expected but also consistent with seasonality.
However, the market is pricing in the risk of recession very strongly due to the hawkish tone of major central banks, in particular from the Fed and the ECB. Also weather forecasts changed dramatically. For the last several days, forecasts have indicated lower than standard temperatures, but the latest forecasts show that the temperature in the US from the west should rise, which may reduce the demand for gas. On the other hand, during the Christmas period demand for gas should increase and additionally, the holiday season is conducive to increased heating of houses and flats.
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US stocks change was in line with seasonality. If the price of gas is to rise at the end of this year, inventories must fall above 100 billion cubic feet per week. Source: Bloomberg
Forecasts from the beginning of the week and the end of the week. One can notice that temperatures are about to start rising, although at the same time in the key heating regions - central and western states, the temperature is expected to remain significantly below average. Source: Bloomberg
Gas fell sharply at the end of this week, but at the same time it is worth remembering that price gaps occur very often during this period and such a gap may occur at the beginning of the next week. It can be seen that the current demand is located around $6-6.3, but at the same time, if the forecasts continue to improve over the weekend, the price gap could bring gas to as low as $5.5/MMBTU. On the other hand, if the temperature drops, the price gap could extend above $7/MMBTU. Source: xStation5
