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Energy Brief for Sept 23 2022

by market analysts Stephen Platt and Mike McElroy

Price Overview

The petroleum complex registered sharp losses trading down to levels not seen since January; as strength to the dollar and a higher interest rates environment raised fears of a global recession. Sentiment was also affected by a downturn in business activity in the Eurozone as reflected in the Purchasing Managers Index which continued to show a contraction in overall business activity particularly in Germany. High energy prices are impacting consumer spending on fears of further shortages of energy curtailing consumer confidence. Services in particular have been adversely impacted falling to their lowest level since November, 2020 when the Continent was suffering from a second round of COVID infections while manufacturing also fell to the lowest levels since June, 2020. With other areas on a global basis likely to be affected, fears over further cuts in demand for oil remain in the background as a negative influence.


The market looks to be focusing upon rising interest rates and dollar strength as foreshadowing additional demand declines. The breakdown in prices decisively through the support near 81.00 basis November is likely to attract additional liquidation pressure down toward the 75.00 area where renewed support is likely to develop. Some caution to the downside is likely on supply concerns linked to the underproduction of OPEC+ ahead of their meeting in early October and questions over. whether they are intent on supporting values through additional production cuts ahead of the embargo of Russian crude by the EU in December. In addition, some recovery in Chinese demand is also apparent.

DTN Natural Gas Daily chart
DTN Natural Gas Daily chart

Natural Gas

The market shot below the 7.50 level after yesterday’s storage report, as the 103 bcf build was well above estimates near 93 and the 5-year average of 81. As has been the case for some time, the move was exacerbated by poor liquidity as fund stop orders below 7.50 flushed the market down to a low at 7.061 basis October for a 70 cent range on the day. Follow-through weakness saw the 7 dollar level taken out early this morning with the market ending the day with a loss of 26 cents at 6.828. Upcoming LNG terminal maintenance and weather indicating a seasonal decrease in demand added to the downside pressure. A tropical depression in the Caribbean that could reach hurricane strength next week with potential to impact the Eastern Gulf offered some underlying support. The oversold condition of the market could lead to a near term recovery that would find initial resistance near 7.50. Further weakness likely finds support in the 6.50 area.

The authors of this piece do not currently maintain positions in the commodities mentioned within this report.

Charts Courtesy of DTN Prophet X, EIA, Reuters


Learn more about Stephen Platt here

Learn more about Mike McElroy here

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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