LNG: Low EU Prices Driving LNG Imports Elsewhere, US Weather Unwinds Dec Rise
US gas was sharply lower on Tuesday as forecasts for higher temperatures later in December drove the unwinding of last week’s 10% gain. Henry Hub fell 6.8% to $4.579, which is still elevated. In contrast, European prices rose 1.9% to EUR 27.375 as inventory drawdowns continue. Prices are still down 5% this month after falling 8.6% in November and the fall is discouraging LNG shipments to Europe, which drove Tuesday’s increase in gas.
- US prices could rise sharply if there is another cold snap, especially if it impacts gas production and transportation. Storage levels have been declining towards their 5-year average.
- European gas trended higher over Tuesday reaching EUR 27.700 before easing. Not only are LNG imports lower but there have been disruptions to flows from Norway with both driving storage levels down which were 0.5pp lower on Monday at 71.8% and 10pp below the seasonal average.
- A mild start to the heating season has helped inventories, which started lower than in 2024, but some models are signalling that there could be a shift colder across northern Europe in the next week, according to Bloomberg.
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AUD: AUD/JPY-Gaps Higher With Risk, End Of Shutdown Could See A Test Of 101.50
The Friday night range was 99.04 - 99.76, Asia is currently trading around 99.90. The pair found some solid demand back toward the 99.00 area and gapped higher this morning on news the US shutdown is to end imminently. Should this come to pass we could have another knee-jerk reaction higher in risk which could make AUD/JPY remain supported in the short-term. The initial focus should return back toward 101.50, a break above here is needed for the bullish trend to re-engaged and momentum higher return. Until we receive actual confirmation of this though I suspect we could remain within the 98.50-101.50 range.
- "KEY SENATE DEMOCRATS PLAN TO ADVANCE GOP BILL TO END SHUTDOWN" - BBG
Fig 1: AUD/JPY spot 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
AUDNZD: AUD/NZD - Extends Above 1.1500, Still No Signs Of Exhaustion
The Friday night range was 1.1524 - 1.1567, the Cross is dealing in Asia around 1.1550. The Cross pushed through 1.1500 and extended higher on Friday. This 1.1500/1.1600 area remains tough Monthly resistance but the price action has been unrelenting. A sustained move back above 1.1600/50 and the market will start to get bulled up as the focus will turn toward the 1.2000 area and beyond. I am a little wary of NZD positioning as the market gets all beared up but the price action for the moment is not showing any signs of exhaustion.
Fig 1: AUD/NZD spot Monthly Chart
Source: MNI - Market News/Bloomberg Finance L.P
US STOCKS: Russell Index - False Break Below 2400, Will Benefit If Shutdown Ends
The Russell 2000 Friday night range was 2380.29 - 2432.82, closing +0.58%. The Russell 2000 had a brief look below the 2400 support area testing for some possible stops, but there was no follow through and when risk turned higher into the close small caps moved back above this support. Risk has gapped higher on the Asian open with news an end to the US shutdown is imminent, should this actually materialise it would be a huge reprieve for Russell Longs if they managed to stay in the trade Friday night. The initial knee-jerk should be higher for risk and I would expect a strong open for small caps if this comes to pass.
- Lance Roberts wrote on X about his concerns for small/mid-cap stocks, “my larger concern remains the forecast for small and mid-cap companies. Over the last few years, with a stimulus-fueled economic boom, these companies had negative earnings. Now, as the stimulus is gone and the economy is weaker, analysts expect earnings to grow sharply? Hope or reality?”
Fig 1: Russell 2000 Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
