Natural Gas, Weather, EIA, Brent Crude, Libya, Technical Forecast – Talking Points
- US natural gas prices hit 14-year high as cold weather hits supply
- Brent crude oil catches a bid as Libya’s oil fields shutter production
- Oil prices hold critical trendline amid volatile trading environment
US natural gas prices soared to 14-year highs this morning, flaming inflation woes and sparking further concerns over a potential US energy crisis. The US Henry Hub benchmark has now rallied more than 100% for 2022, making it one of the year’s best performing commodities. Temperatures across the US Northwest and Midwest have been colder-than-average for this time of year, boosting demand for the heating gas.
Those below-average mercury readings are expected to persist through the next six to ten days, according to the National Weather Service. The war in Ukraine has also led to an increase in liquified natural gas exports. Those factors have sapped US inventory levels, driving domestic supply concerns. Total working gas in underground storage has fallen well below its 5-year average, according to data from the US Energy Information Administration (EIA).
While US natural gas production has increased, gas producers have struggled to keep up with demand. The US natural gas rotary rig count hit its highest level since October 2018 at 143 rigs for the week ending April 15, according to Baker Hughes. That number is expected to increase to 145 for the week ending April 22, with data due out on Wednesday. However, for now, near-term weather patterns will have a larger influence on prices, but with inventory levels well below average, prices may continue to float higher in the short term.
Elsewhere, oil prices are gaining steam. Brent crude prices pushed into fresh April highs overnight as supply concerns over Libya’s oil fields add to an already tight market. Libya’s state-operated National Oil Corp. (NOC) announced force majeure at the Sharara oil field on Monday. Force majeure is a legal option releasing the operator from contracts.
The field was shut down by protesters who aim to remove Prime Minister Abdul Hamid Dbeibah from power. Over the weekend, protestors of the same group shut down other facilities east of Tripoli. The country’s daily production may be hampered by as much as 400,000 barrels per day. Oil prices are likely to react as the situation develops. Oil traders will also be watching inventory data this week from the US EIA.
Crude Oil Techical Forecast
Oil prices rose to the 20-day Simple Moving Average (SMA) before cooling this morning. That SMA aligns with the 38.2% Fibonacci retracement level from the December-March move. Bears attempted to breach a major trendline last week before prices rebounded, gyrating around the 50-day SMA. Prices may drift higher along the trendline this week.
Crude Oil Daily Chart
Chart created with TradingView
— Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or @FxWestwater on Twitter
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