EBC Markets Briefing | Investors bet on continued rally in US gas

Oil prices fell in early Asian trade on Wednesday as US stockpiles could have jumped unexpectedly, fuelling concerns about weaker-than-expected demand in the top oil consuming nation.

Portfolio investors have rebuilt their position in crude oil after reassurance from Saudi Arabia and its OPEC+ allies that any planned future increases in production would be contingent on market conditions.

But they are still pessimistic about the outlook for prices in the short term, with the net position in only the 13th percentile for all weeks since 2013. It appears that the market will unlikely face a supply shortage.

The Biden administration is ready to release more oil from its strategic stockpile to halt any jump in petrol prices this summer, as the White House battles to contain inflation ahead of the November election.

Meanwhile, portfolio managers continued to increase their bullish position in US gas but at a slower rate than in recent weeks as inventories proved stubbornly high and the price rally ran out of momentum.

In percentage terms, inventories were 24% above the ten-year seasonal average down from a surplus of 40% some 13 weeks earlier. Major gas producers announced cuts to drilling programmes in Q1.

The golden cross suggests that could be more potential upside in the benchmark gas price. However only by returning above $3 will it extend the rally from mid-February.

EBC Financial Market Forecast Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC Economic Research Findings or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.