Natural gas prices are low. Really low. Really really low. The refrain has started to get tiresome. Yes it is a warm winter and yes shale production is high. We’ve all got that. The only question seems to be ‘Where is the bottom?’
Since there is little on the fundamentals side that will help the market find a bottom, we must look to the technicals. I’m no expert in technical analysis (more on that topic here in the next few days), but it doesn’t take a guru to figure out that all the charts say that the market is oversold. RSI has plunged. Open interest is up significantly in a falling market. According to ecomenergy.com, that should indicate that the market will soon run out of sellers, and bounce upward. Makes sense to me. But will it hold? I’m betting that hugely bearish fundamentals will overwhelm any bounce and drive prices back into the dirt. The dead cat bounce theory from last week’s blog.
Beyond the world of crashing natural gas prices, there are some other interesting things going on. Methanex is relocating one of its idled methanol plants in Chile to Louisiana. Makes you wonder how many more plants will be restarting to take advantage of cheap natural gas. I’ll do some research on that. Perhaps there really is a demand response out there somewhere.
EIA reports that the refinery yield of distillates (including diesel fuel and heating oil) is way up at 29.7%, matching the previous record set in December 2008. Refineries are making most of their money right now on diesel, with gasoline margins sucking wind. Diesel is now a net export. Look for more refinery developments as distillate yields continue to increase.
John Kingston at Platts was interviewed on Fox news this morning about the impact of Keystone XL on crude prices. The conversation turned to the general state of international crude market balances, which is weak. Saber rattling is the only thing keeping crude prices up. Good info, and definitely worth watching.