23 October 2019
- Our assessment for the short-term natural gas supply on the US market remains bearish. This claim is backed up by one of the key variables in our proprietary systematic fundamental model, namely the Implied Spot Supply. We remain of the opinion that supply is unlikely to contract in Q4, which continues to impose a ceiling above any price rally potentially inspired by demand. The inventory cycle is not likely to offer further help as the pacer of injections is likely to slow down further.
- Overall demand has deteriorated but this is visible best through our proprietary Export Demand Pressure Index displayed on the chart below. Our model involves multiple demand-related market drivers ranging from short-term weather signals to the balance between fossil fuel and renewables. One such variable is our proprietary USA NatGas vs. Wind Spread which has improved after a disastrous season for wind power generation. The index claims to quantify the demand for natural gas arising from our prediction for renewable (wind) output for the period. The outlook for November is cautiously positive.
- The macroeconomic conditions remain bullish but our conviction diminished further since last week. Evidence in support of this statement can be found in the latest value and trend of our ST credit conditions index. The index takes into account the intensity of credit creation within the US economy. One price-negative development continues to arise from the gradual accumulation of short positions on the US natural gas market.