Natural gas prices (NYMEX:NGH14) are being driven toward an upside breakout as an artic deep freeze challenges the nation. It also means that we will challenge record natural gas production and see how that will keep prices under control. Market Watch reports that Northern and Central regions of the U.S. are seeing "life-threatening wind chill" conditions, with temperatures dropping to the lowest point in almost two decades, federal officials warned Sunday. The weather would feel as cold as 60 degrees below zero Fahrenheit in certain regions, according to the National Weather Service. As much as a foot of snow was projected to accumulate from the eastern Plains to the Great Lakes, and there may be freezing rain over parts of northern New England and northern mid-Atlantic areas.
Still the mantra in the natural gas market has been “supply will exceed demand,” yet demand may be at an all-time record high as well. Nat Gas is challenging the top of the recent downtrend channel. Let us see if it is cold enough to break out.
Oil prices (NYMEX:CLH14) have fallen hard and are poised to move lower yet the speed of the drop means we are vulnerable for an upside snap back, possibly on geo-political concerns. Dow Jones reports that disruptions to Libya's oil supply, caused by protesters, including workers and armed militia, have resulted in the country's output falling to below 250,000 barrels a day, compared with 1.6 million barrels a day in 2011 before the conflict that led to the fall of Moammar Gadhafi. Oil has started flowing again from one of Libya's largest oil fields, Sharara. However, protesters began blocking a separate oil pipeline in the region and there is uncertainty as to when tribal leaders in eastern Libya will end their blockage of the three oil ports.
Oil inventories should start to rise again in the New Year. Look for crude to be up 3 million and gasoline to be up 2 million barrels and distillates up 2.50 million barrels and refinery runs should stay steady.