LNG: US Gas Prices Higher Today, Europe Likely To Follow After US Strikes Iran
Gas prices were lower on Friday but US Henry Hub has started today over 1.5% higher following US attacks on Iranian nuclear sites which have increased concerns over the shipping of fossil fuels through the Strait of Hormuz.
- The US said that it destroyed the Fordow, Natanz and Isfahan nuclear sites. US President Trump said that Iran must now agree to peace but Iran’s President Pezeshkian threatened the US and said it “must receive a response for their aggression”.
- Iran could disrupt vessels in the Strait to “punish” the US but it would also impact its own revenue flows. Thus the situation is being monitored closely.
- The Greek government warned its shipping to reassess the need to travel through Hormuz and suggested vessels wait for clarification, according to Bloomberg. The EU and Joint Maritime Information Center have increased the risk level of an attack in the region.
- Goldman Sachs believes that if seaborne traffic through the Strait of Hormuz were cut in half then European gas prices could rise to at least EUR 74 if maintained, while Brent could reach $110/bbl, reported by Bloomberg.
- US natural gas fell 2.3% on Friday to $3.896 but is now up 1.6% to $3.907 and up 12.1% since Israel first struck Iran. The outlook for warmer weather has also been supportive but lower temperatures for July weighed late last week. Bloomberg notes that the 9-day relative strength index flashed overbought.
- European prices fell 1.7% to EUR 40.94 after Trump indicated he’ll wait to strike Iran, which may be reversed when markets open. They are almost 20% higher in June and over 13% since the Israel-Iran conflict started. They reached EUR 41.23 on Friday, the highest since early April, before moderating.
- On the supply side, LNG Canada produced its first LNG for export at a new plant in British Columbia. Lower-48 US output rose 4.2% y/y% on Friday with demand down 11.1% y/y.
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JGB TECHS: (M5) Rallies off Lows
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 139.40 @ 15:42 GMT May 23
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs have rallied off recent lows and for now, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
US FISCAL: Total Tariff Income Jumping In May As New Rates Hit
Treasury reported a record $16.5B in customs/excise taxes on May 22, reflecting the large increase in tariff rates that went into effect in April.
- Today's report is important because it represents the largest tariff collections of the month which are typically on a due date around the 22nd, when most corporate importers make their payments.
- Thursday's one-day collection is a record, and the month has already set a new record. Tariff revenues have totaled $22.3B so far in May, and are came in at $17.4B in April (after averaging $8.1B/month in 2024).
- For the fiscal year as a whole so far, customs duties have totaled just under $93B, per the Treasury Daily Statement.
US FISCAL: Extraordinary Measures Continue To Dissipate Alongside Treasury Cash
Treasury's latest estimate of the size of "extraordinary measures" available to use "in order to prevent the United States from defaulting on its obligations as Congress deliberate[s] on increasing the debt limit" is down to $67B on May 21 (of an available $299B), vs $82B a week earlier.
- The amount hit the 2nd lowest level since the debt limit impasse started, at $46B, on May 20 (the low was $34B on Feb 24).
- With $476B in cash in the Treasury General Account on May 21, that left the total resources available to Treasury at $543B, the least since April 14 - the day before the annual April 15 tax deadline.
- Treasury Sec Bessent warned Congress earlier this month that "there is a reasonable probability that the federal government's cash and extraordinary measures will be exhausted in August while Congress is scheduled to be in recess. Therefore, I respectfully urge Congress to increase or suspend the debt limit by mid-July".
