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Commodities

Natural gas prices near 52-week high amid harsh winter season in America

Natural gas contract due for delivery on March 21 traded at $3.050 per one million British Thermal Units.

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FEC reviews Ajaokuta-Kaduna-Kano gas project contract, approves $2.571 billion

Prices of natural gas at the futures markets had been close to their 52-weeks high amid reports showing tightening supplies at the world’s largest economy coupled with strong demand in the Northern hemisphere as the winter season becomes harsher.

At the time of writing this report, the natural gas contract due for delivery on March 21 traded at $3.050 per one million British Thermal Units, nearing its 52-week price high of 3.396 per one million British Thermal Units.

Energy traders are going long on the prized energy asset on reports that a rare deep freeze in America’s major oil hub, Texas-raised demand for power thereby forcing the U.S. state’s electric grid operator yesterday to impose rotating blackouts that left nearly 3 million customers without electricity.

READ: FG introduces gas transport network code

Natural gas is a form of a fossil energy source that is primarily found and formed deep beneath the earth.

  • Natural gas primarily contains hydrocarbon in the form of CH4 (methane) Carbon IV oxide and water vapor.
  • Fossil gas is a fuel used majorly in powering electricity, warming many homes in emerged markets, and in the production of chemicals. A significant amount of natural gas is exported in liquified form often referred to as liquefied natural gas.

Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics spoke on other macro macros boosting the energy markets most particularly at the world’s largest economy;

“Accelerated vaccine rollouts globally and a sharp reduction in COVID-19 infections in the US provide the backbone for energy markets’ next recovery phase.

“And the most likely scenario should see absolute demand lift-off starting in spring or early summer amid heightened market overshooting risks as calls grow more vocal for an increase in the pace of reopening across the USA.”

READ: N250bn to be spent to fund compressed Natural Gas infrastructure

Bottom Line, the unexpected US supply disruption in the natural gas market provides another short-term price recovery bridge that has likely taken natural gas prices to a level where markets were eventually heading but just a little bit quicker than expected.

Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment trading. Follow Olumide on Twitter @tokunboadesina. He is a Member of the Chartered Financial Analyst Society.

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Commodities

Oil prices plunge on fears OPEC+ may increase Oil supply

Oil traders are becoming wary that OPEC+ will increase oil output and further distort the energy demand/supply dynamics.

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OPEC+ Alliance, US, Russia, Canada, Mexico reach historic deal to cut 13.4 million bpd, Oil market still uncertain over the OPEC+ deal as prices react positively, 7 oil producing countries most affected by covid-19, see where Nigeria is placed

Oil prices lost more than a percent at the second trading session of the week. Oil traders are virtually going to extend short on concern that OPEC may agree to increase global supply in a meeting this week and Chinese demand may be dropping.

At the time of writing this report, Brent crude dropped by 1.2%, to trade at $62.91 after losing 1.1% in the past day. U.S. West Texas Intermediate (WTI) crude dropped by 1.2%, to trade at$59.90 a barrel, having lost 1.4% on Monday.

Oil traders are becoming wary that OPEC and its allies, a group often referred to as OPEC+, will increase oil output and further distort the energy demand/supply dynamics.

READ: Oil prices drop, despite strong fuel demand in play

The group meets is scheduled to hold on Thursday as discussions might include allowing as much as 1.5 million barrels per day of crude oil back into the market.

Stephen Innes, Chief Global Market Strategist at Axi in a note to Nairametrics explained why the OPEC+ meeting matters most to many oil traders.

“Constructive oil market fundamentals have blown slightly off course ahead of the OPEC + meeting on Thursday as oil prices took to the plunge pool overnight, with Brent back to the soft US$63 handle after trading as high as $66.82 only last Thursday.

“Commodities were mostly weak overnight as the dollar regained a bit of ground. OPEC+ will meet this Thursday, and expectations are that despite Saudi Arabia’s call for caution, most members will push for an increase in output,” Innes stated.

READ: Oil Price: A dead cat bounce in the making?

Bottom line: energy pundits expect the all-important meeting this week in being one of the most interesting oil meetings in Q1, with Saudi Arabia urging producers to remain “extremely cautious”.

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Commodities

Oil gains 15% in February, as Saudi Arabia’s output curbs help

Oil prices rose for a fourth straight month, despite its heavy plunge at the last trading session of the month.

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Crude oil prices, bonny light, 4 key reasons why Brent crude might slip back to $35 per barrel, Crude oil prices resume weekly gains as demand picks up 

Oil prices rose for a fourth straight month, despite their heavy plunge at the last trading session of the month.

British-based oil contract, Brent crude, which is the international benchmark for oil, settled at $64.42, down 3.7% on the day. For the week, it however rallied up by 2.5%. For the month, it was up 15%, extending gains in January, 9% in December, and 27% in November.

  • Brent crude also hit a 13-month high of $66.81 in February. Oil traders will now be looking at the all-important meeting led by the Organization of Petroleum Exporting Countries with allies steered by Russia, which is to meet in the coming days to set output quotas for April.
  • The Saudis had contributed massively in supporting crude oil prices last month when they pledged to make these extra curbs only this month and March, but some see signs that suggest a change in such status quo.

READ: Nigeria, other African oil-producing countries will lose $1tn oil revenue in 20 years – PWC

Saudi Arabia, the leading oil producer after the United States, is OPEC’s most important producer as it has proven reserves equivalent to 221.2 times its annual needs. This means that, without Net Exports, there would be about 221 years of oil left.

That said, OPEC has 70% of the world’s proved crude oil reserves. Venezuela leads the title for the highest crude oil reserves with 304 billion barrels, followed by Saudi Arabia with 298 billion barrels.

Stephen Innes, Chief Global Market Strategist at Axi, in a note to Nairametrics, gave insightful macros that could weigh on oil prices in the short term.

“Stronger US dollar, especially against Asia EM and higher bond yields, lead to the selling of long-duration assets. And given the massive overweight of “long duration, infinite growth tech” at the index level, stocks are capitulating.

“And the domino effect is starting to hit commodities like oil triggered by a correction in the reflation trade due to higher US yields that are becoming a significant source of market volatility.

“Next week’s OPEC+ meeting has more potential to be damaging than a positive catalyst given the optimism now priced into oil and the likelihood the group takes steps that could prompt a round of profit-taking,” Innes stated.

What to expect

Still, oil traders anticipate such corrections are likely to be short-lived given evidence of an ongoing demand rebound and the likelihood that oil markets remain tight this year.

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