Market Analysis
Today we run through some stark divergences as the US equity market posts new highs, noting weak breadth and other indicators that in the past have suggested higher risk of an episode of consolidation. We also look at interesting signs in the T-bill auctions that the market remains wary of the debt ceiling situation that hasn't yet gone away. Also, a look at crude oil, gold and rising food prices, the macro calendar for the week ahead and more. Today's pod features Althea Spinozzi on fixed income, Ole Hansen on commodities and John J. Hardy hosting and on FX.
Surging gas prices fail to inspire rangebound crude oil
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.
Comments