Chinese Intervention Pressures Energy Prices
October 22, 2021
China’s intervention in the coal market sent the price down 11% in yesterday’s trading. Natural gas prices in China also were under selling pressure. This spilled over into the other energy markets. Also helping the selling in the US was a warmer weather outlook. The US National Weather Service winter forecast looked warmer than normal. The updated forecast on 10/21/2021 now expects the US to be warmer than normal and dryer than normal, especially in the southern and eastern US. This news also helped to ease propane prices back off recent highs.
UBS sees Brent crude prices at $90 per barrel in December and March, before falling to $85 per barrel for the rest of 2022. It previously estimated a price of $80 per barrel for all tenors. It said it expects the oil market to remain tight and OPEC+ will likely add supplies “only gradually”. It stated that inventories in OECD countries are at the lowest level since 2015 and demand for oil is set to reach 100 million BPD in December. The bank stated that investors with high-risk tolerance can still add exposure to longer-dated Brent oil contracts.
JP Morgan analysts said if withdraws from Cushing continue at the current pace, the oil market could be weeks away from the storage hub effectively running out of crude. Cushing’s “operational tank bottoms are likely 20-25% of capacity” or 20 million barrels. They stated that if nothing changes in Cushing balances, WTI spreads could increase to record highs.