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- Oil prices maintain a critical trendline in the face of a volatile trading environment. Natural gas prices in the United States soared to 14-year highs this morning, escalating inflation concerns and raising new concerns about a potential US energy crisis. The US Henry Hub benchmark has now gained more than 100% for 2022, making it one of the best performing commodities of the year. Temperatures in the US Northwest and Midwest have been colder-than-average for this time of year, increasing demand for heating gas.
- According to the National Weather Service, those below-average mercury readings are expected to last for the next six to ten days. The Ukraine conflict has also resulted in an increase in liquefied natural gas exports.
- These factors have depleted US inventory levels, raising concerns about domestic supply. According to data from the US Energy Information Administration, total working gas in underground storage has fallen significantly below its five-year average (EIA).
- While natural gas production in the United States has increased, gas producers have struggled to keep up with demand. According to Baker Hughes, the number of natural gas rotary rigs in the United States reached its highest level since October 2018 with 143 rigs for the week ending April 15. This figure is expected to rise to 145 for the week ending April 22, according to data released on Wednesday.
- However, near-term weather patterns will have a greater impact on prices for the time being, but with inventory levels well below average, prices may continue to float higher in the short term.
- Brent crude prices rose to new April highs overnight as supply concerns about Libya’s oil fields exacerbated an already tight market. On Monday, Libya’s state-owned National Oil Corp. (NOC) declared force majeure at the Sharara oil field. Force majeure is a legal option that allows the operator to be released from contracts.
- Protesters seeking to depose Prime Minister Abdul Hamid Dbeibah shut down the field. Protesters from the same group shut down other facilities east of Tripoli over the weekend.
- The country’s daily output could be reduced by up to 400,000 barrels per day. Oil prices are likely to fluctuate as the situation unfolds. This week’s inventory data from the US EIA will also be closely watched by oil traders.
- Oil prices rose to the 20-day Simple Moving Average (SMA) this morning before falling back. That SMA corresponds to the 38.2% Fibonacci retracement level from the December-March move. Last week, bears attempted to breach a major trendline before prices rebounded, gyrating around the 50-day simple moving average. This week, prices may rise along the trendline.