Surging gas prices fail to inspire rangebound crude oil Surging gas prices fail to inspire rangebound crude oil Surging gas prices fail to inspire rangebound crude oil

Surging gas prices fail to inspire rangebound crude oil

Ole Hansen

Head of Commodity Strategy

Summary:  Crude oil remains stuck near the bottom of a seven-dollar range, that has prevailed for the past month, with mixed signals creating some uncertainty with regards to the short-term direction. Gas prices in Europe and Asia meanwhile has been shooting higher once again with the continued worry about tight supplies this winter being the main driver.


Crude oil remains stuck in a seven-dollar range with mixed signals creating some uncertainty with regards to the short-term direction. The downside risk is currently being supported by the risk of a joint U.S. and China stockpile release in order to cool prices and ease elevated fuel costs in both countries. In addition, we are once again seeing travel stocks trailing the overall market as the risk of a Covid-driven reduction in mobility is rising around the world.

    In addition, the latest monthly Oil Market Reports from the EIA and most recently from the IEA points to a reduced risk of higher prices as moderating demand growth due to another Covid wave and weaker industrial activity, partly due to higher oil and gas prices, combined with a steady rise in supply will support a balanced market sometime in early 2022.

    Against this potential price negative developments, we find support from a renewed surge in European and Asian gas prices driving increased demand for fuel products such as diesel, heating oil and propane at the expense of gas. During the past three trading sessions, the price of Dutch TTF benchmark gas has jumped by one-third to €100/MWh or $33/MMBtu, more than six time higher than the long-term average price.

    Initially the rally was driven by disappointment over Gazprom’s lack of interest in booking additional pipeline capacity for December via key supply lines through Poland and Ukraine. However, most of the damage was done following yesterday’s announcement that the controversial Nord Stream 2 pipeline would face further delays. This after German regulators suspended the certification process while waiting for the operator to set up a German subsidiary that would own the section German section of the pipeline. In the latest twist, the German regulators on Wednesday said the suspension of licensing NS2 could delay commissioning to March 2022.

    Adding insult to injury, short-term weather forecasts point to below seasonal temperatures in Europe into early December while Russia looks set to be warmer. Potentially and under normal circumstances a good incentive for Gazprom to ship more gas to Europe.

    Source: www.tropicaltidbits.com

    The crude oil market, as mentioned, is currently trying to navigate opposing forces, the sum of which for now is keeping both WTI and Brent crude oil locked in a seven-dollar range. Money managers and large speculators have been net sellers of Brent crude oil for the past five weeks, this during a time where the price rallied to but failed to break the 2018 high at $86.75. The latest Commitments of Traders report covering the week to November 9 showed a drop in the Brent crude net long to a one-year low at 240k lots or 240 million barrels. At the same time, falling stocks at Cushing, the WTI delivery hub has provided some relative support, thereby kept the net length close to unchanged around 340k lots.

    Later today, the market attention once again turns to the weekly US inventory report. According to surveys and last night's update from the American Petroleum Institute, the Energy Information Administration is expected to show another rise in crude oil stocks while gasoline stocks, already at a four-year low, is expected to drop even further. Also in today’s report, traders will be looking out for a change in production and whether additional barrels have been released from Strategic Reserves on top of the 12m million barrels that have been fed into the market during the past couple of months.

    Quarterly Outlook 2024 Q3

    Sandcastle economics

    01 / 07

    • Macro: Sandcastle economics

      Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

      Read article
    • Bonds: What to do until inflation stabilises

      Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

      Read article
    • Equities: Are we blowing bubbles again

      Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

      Read article
    • FX: Risk-on currencies to surge against havens

      Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

      Read article
    • Commodities: Energy and grains in focus as metals pause

      Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

      Read article
    • The rise of populism: Far-right parties will influence the future

      The disheartening cycle of unresolved geopolitical conflicts, the rise of polarizing political parties, and the stagnation of productivity.

      Read article
    • Investing in China: Navigating Q1 amid economic challenges

      Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.

      Read article
    Disclaimer

    The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

    Please read our disclaimers:
    - Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
    - Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

    None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

    Saxo Capital Markets HK Limited
    19th Floor
    Shanghai Commercial Bank Tower
    12 Queen’s Road Central
    Hong Kong

    Contact Saxo

    Select region

    Hong Kong S.A.R
    Hong Kong S.A.R

    Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

    Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

    The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

    The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

    Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.