19 May 2020
- In our last publication, we suggested that storage injections may be boosted in an effort to reduce oversupply produced by a drop in LNG exports. This has occurred and thus there has been a very strong start to the restocking season. We have also seen a tightening in spot supply due to a drop in production, which was seen following week 18. This was also done in response to the drop in LNG exports and to maintain supply and demand balance during quarantine. Our projections looking forward for the weeks ahead by our Implied Forward Demand Index show an increase in supply relative to the current values, however we can likely expect tightness to be maintained as demand increases.
- Recently we have seen a change in the weather over the USA. After a series of low-pressure systems which brought cooler than normal temperatures, we are now seeing high pressure over the east coast bringing warmer than normal temperatures which our forecasts suggest will stay for the next 15 days. This warmer weather has led to a drop in demand, shown by our Implied Spot Demand. Here, we can see that the demand for this week (week 21) is lower than the 5-year mean. This is because of both the weather and the effects of quarantine.
- Previously, we described how the balance between buying and selling had produced positive results in our Money Flow Index. However, this week we have seen a return to negative territory. This suggests that those on the selling side of the market outweigh the buyers. Furthermore, we continue to see credit liquidity deplete. This is shown in our Short-Term Credit Conditions index. However, as the US slowly opens up from lockdown and starts to increase economic activity, we are seeing improvements to our Energy Intensity index. We expect these improvements will continue in the coming weeks.