20 November 2019
- Our assessment for the short-term natural gas supply on the US market remains bearish for 6 straight weeks. We also remain of the opinion that supply is unlikely to contract in Q4, which continues to impose a ceiling above any price rally currently inspired by demand. The inventory cycle is not likely to offer further help as the pace of injections has slowed down further.
- Our model involves multiple demand-related market drivers ranging from short-term weather signals to the balance between fossil fuel and renewables. End-user demand outlook remains weak as the ground temperature anomalies for December in the USA are forecasted to be above average. Another component is our proprietary Export demand pressure index which has been drifting lower for 7 consecutive weeks. The trend is suggesting that the incentive to export in the form of LNG is simply not there. The result is elevated domestic supply.
- Our assessment of the short-term macroeconomic conditions is bearish. Evidence in support of this statement can be found in the latest value of the Implied Energy Intensity index. Our estimate confirms that the intensity has peaked, e.g. same amount of economic output is produced with fewer units of energy employed in the process. Another argument in favour of our outright bearish macro view is the intensity of credit creation within the US economy. Its trend is bothering us as it is showing signs of contraction which is never supportive news for the demand of energy.