LNG: European Prices Lower But Market Remains Vulnerable To Supply Disruptions
Natural gas prices were mixed on Tuesday with Europe sharply lower but the US higher. European gas fell 6.7% yesterday to EUR 43.99 to be down 17.4% this month. It reached a peak of EUR 59.39 on February 11 but has been trending lower on hopes of peace in Ukraine allowing the use of Russian pipeline flows again but a lot has to happen before sanctions will be eased. Also with prices high and storage at below-average levels, German utility Uniper SE has suggested reducing refilling targets to 80% ahead of next winter (Bloomberg).
- Cold weather and lower wind-driven power resulted in significant inventory drawdown but more recent higher-than-average temperatures have allowed Belgium and France to add slightly to storage, according to Bloomberg. Prices remain elevated though and the market remains vulnerable with significant flows needed to restock ahead of next winter.
- Ukraine’s largest private energy firm DTEK is negotiating LNG import agreements. Supplies will mainly come from the US but also the Middle East (Qatar is a major LNG exporter), according to Bloomberg. The gas would be used to fill its storage facilities, which Europe uses, and would transit through ports in Germany and eastern Europe.
- US natural gas rose 4.7% on Tuesday to $4.18 to be up 37.4% in February. Buyers were attracted to the market following Monday’s 6% fall, which was driven by forecasts for milder weather. The Commodity Weather Group is projecting higher temperatures across much of the US in early March.
- Oil markets have worried about the strength of China’s demand for some time given the lacklustre economic outlook. China has imposed tariffs on US oil and LNG imports but its overall LNG imports were around 13% below the 5-year average according to ANZ.
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ASIA: Government Bond Issuance Today.
- Thailand to Sell 40 Billion Thb of 182-Days Bills
- MAS to Sell S$15.9 Billion 25-Day Bills
- MAS to Sell S$22.5 Billion 83-Day Bills
- Philippines To Sell PHP 7.0Bln 90D Bills (PH0000058463)
- Philippines To Sell PHP 7.0Bln 181D Bills (PH0000058935)
- Philippines To Sell PHP 8.0Bln 363D Bills (PH0000059818)
- Bank of Korea to Sell 1 Trillion Won 91-Day Bonds
JGB TECHS: (H5) Trend Needle Points South
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 142.73/144.48 - High Dec 9 / High Nov 11
- PRICE: 140.70 @ 15:52 GMT Jan 24
- SUP 1: 140.00 - Round number support
- SUP 2: 139.38 - 2.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 138.87- 3.000 proj of the Aug 6 - Sep 3 - 9 price swing
A clear downtrend in JGB futures remains intact and the latest fresh cycle lows reinforce this condition. Note too that moving average studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The move down exposes the 140.00 psychological handle next. For bulls, a reversal would open 142.73 and 144.48, the Dec 9 and Nov 11 high respectively. For now, short-term gains are considered corrective.
JGBS: Futures Up-Ticked Overnight Friday, Trump Tariff News On Sunday In Play
In post-Tokyo trade on Friday, JGB futures closed with an uptick, +1 compared to settlement levels, after US tsys finished mildly stronger.
- US stock futures have re-opened lower ahead of key earnings week, with the S&P 500 down ~0.50% and the Nasdaq down ~1%.
- “In a social media post on Sunday, Trump said he ordered an emergency 25% tariff on all Colombian goods coming into the US, which will be raised to 50% in a week. Oil, gold, coffee and flowers top the list of exports, according to Colombia’s tax authorities.” (per BBG)
- On Friday, the S&P Global US composite PMI surprisingly fell in the January flash, showing its lowest since April, after 55.4 in December, which marked a 32-month high. Inflationary pressures saw a four-month high which helped limit the dovish reaction from the headline services miss.
- Meanwhile, U.Mich long-run inflation expectations were trimmed in the final January release from what had been a particularly sharp increase to the highest since 2008. 3.2% is still elevated though, having twice in the past three months exceeded what had been a typical 2.9-3.1% range since mid-2021.
- Focus this week is the FOMC policy announcement on Wednesday.
- Today, the local calendar will see Coincident/Leading Index alongside an Auction for Enhanced-Liquidity 5-15.5 YR.
