The energy market is facing some turbulence. Natural gas futures rose during the US session on Wednesday.
March natural gas futures on the New York Mercantile Exchange are trading at $3.26 per million British thermal units (MMBtu), up 0.15% from the previous sessions.
During the session, the price peaked at $3.34 per MMBtu, with support set at $2.99, and resistance at $3.40. This indicates that the gas market remains quite active, despite the volatile factors at play.
However, it is important to note that in the midst of these movements, the futures on the US dollar index, which reflects the value of the US currency against a basket of six major currencies, fell by 0.46% to settle at 107.33. This in turn affected global markets and the prices of other commodities, including oil.
Oil is also facing challenges. March WTI crude oil futures lost 2.1%, dipping to $71.17 per barrel. March heating oil futures fell 1.68% to $2.39 per gallon. The decline in oil and heating oil prices is due in part to external economic factors that have once again put energy resources at risk.
Oil prices have been volatile in recent weeks, which is to be expected given political instability and changes in the global economy.
Here is an interesting development: China, which has historically been a major oil buyer, could have a significant impact on the situation going forward. In response to US tariffs, China is considering countermeasures that could lead to a decline in US oil exports in 2025. This would mark the first decline since the start of the COVID-19 pandemic and could be a crucial factor influencing the oil market.
Interestingly, since the lifting of the US oil export ban in 2015, exports from the country have increased more than tenfold. This has helped the US become the third-largest oil exporter globally, surpassing Saudi Arabia and Russia. While China's demand for US oil had been gradually decreasing due to more favorable offers from Russia and Iran, last year, exports to China accounted for nearly 5% of total US oil exports. However, in 2024, the growth rate slowed, potentially affecting overall oil export volumes.
This is a significant shift for the oil market. In recent months, export growth has slowed, rising by only 0.6%, or about 24,000 barrels per day. This can be attributed to concerns about global demand, which have dampened investment in shale production. While there is plenty of oil in the global market, these price fluctuations are not mere coincidences. The need for additional US oil supplies remains high, and this situation will continue to influence prices.
On the geopolitical front, it is also important to mention the situation with gas supplies to Europe. According to Bloomberg estimates, the halt of gas supplies from Russia through Ukraine could significantly reduce gas storage levels in Europe, down to 30-35% by April. This compares to 55-60% in the previous two years. If the current scenario continues, stocks could fall to their lowest levels by the end of winter, which will undoubtedly have an impact on gas prices in Europe.
The issue is that, according to EU regulations, gas storage facilities must be filled to 90% by November, which will require Europe to purchase 725-750 TWh of gas. As you can imagine, such a volume of purchases could significantly affect gas prices, putting additional pressure on the market.
Gas supplies are currently facing challenges, and as we all know, when there is a shortage, prices start to rise. Regardless, this year, the gas situation could be vastly different from what we are used to. For instance, prices have already surged during the winter, and forecasts suggest that everything will depend on how quickly reserves can be replenished.
Furthermore, Ukraine has officially announced the suspension of gas transit through its territory after the contract with Russia expires in 2024. This will also affect the European gas market and could lead to even more shortages in the future.
Thus, the situation with energy resources and oil remains tense and fluid. We can see how geopolitics, economic sanctions, and internal issues in major exporting countries are affecting the market. But one thing is certain—prices will fluctuate. While it is difficult to predict, looking at the trends, all we can do is monitor the situation and be ready for any developments.
