Natural Gas Could Head Lower in the Short-Term; U.S. GDP Above Consensus

The GDP of the United States in the fourth quarter of 2022 recorded an increase of +2.90%, the consensus was +2.60%. Growth was largely fueled by changes in inventories and public spending.

New jobless claims continue to fall, they came in at 186,000 last week, down from 192,000 the previous week. Durable goods orders rose by +5.5%, from -1.7% in November.

New home sales rose 2.3% in December to 616,000: the consensus was 612,000.

All in all, these are solid data, consistent with the continuation of monetary tightening in softer terms than in the past, therefore, with increases of 25 basis points in the next two or three Federal Reserve meetings.

The data on inflation in February will be important. If the data exceeds the forecasts, the collapse of the market should arrive, with a FED that will necessarily have to be aggressive in terms of rate hikes.

Natural Gas: The Market Is Oversupplied

The market just recorded new annual lows but there is a clear difference between the short and long term right now. In the long run, the situation is interesting.

Europe will need even more LNG to replace Russian volumes next summer as the continent reloads storage and as Chinese demand recovery starts offsetting lower imports from other Asian buyers.

In the short term, the situation is negative for natural gas. The European danger has vanished, with total inventories in the EU, thanks to deficient demand for gas due to abnormal heat, savings at both the industrial and retail levels, and the green energy transition underway.

However, during summer, the situation could be different, with difficulty filling in the inventories.

In the US, demand is low due to the weather; this is creating excess domestic supply for prices which adds to the reopening of some export plants, which have been offline for some time and are now contributing to the oversupply.

But beware, the Freeport LNG plant, one of the most important export facilities, has started receiving natural gas from the pipelines, suggesting that it is very close to reopening and positive indications are coming from the weather projections, with the cold finally appearing to arrive by mid-February.

The data on yesterday's inventories are also good, down by 91 BCF, better than the forecasts, which gave 82.

Disclosure: I have a position in gas with an average bid price of 3.5, a buy position in the VIX and a US stock. I'm suffering on the gas, but it's normal being an instrument with a very high standard deviation.