AEGIS Hedging : April 8, 2024

Oil is trading lower, near $86, after reaching the highest level since November last week

The US Dollar is trading higher on fears that the Fed may keep rates higher for longer after last week's strong jobs report
The US crude oil rig count increased by two rigs to a total of 508, according to data from Baker Hughes
Managed money positioning increased by 10k contracts, driven by an increase in long positions through last Tuesday, according to CFTC data released on Friday

317k Brent call options traded on Friday, the second busiest trading day for call options on record
This comes after Brent futures traded above $90 for the first time in several months, and market participants have become more bullish
A large increase in buying of call options can lead to more buying in the futures market, as traders who sold the call options may have to buy futures to hedge their position and prevent losses in the event of a market rally

Natural gas prices are slightly higher, around $1.80, extending gains from last week

Spot prices at the Houston Ship Channel and Katy Hub have fallen to the lowest levels in more than a decade as the East Texas market faces continued pressure from supply
Gas production is lower at the start of the week, around 98.9 Bcf/dm according to early pipeline nominations
LNG demand remains lower, around 12.5 Bcf/d, amid significant maintenance at Freeport LNG

According to the latest forecast by Colorado State University, researchers are expecting “a well above average probability for major hurricanes making landfall along the continental US coastline”
Their forecast is driven by warmer than average ocean temperatures and a fading of El Nino conditions, which can lower the probability of storms from reaching the US
Hurricanes and tropical storms pose a bearish risk to gas prices, as the majority of US LNG feedgas demand is along the US Gulf Coast, while only about 1.6 Bcf/d of gas is produced in the Gulf of Mexico

Hurricanes also pose a risk to power demand as storms can often knock out power lines and damage electricity infrastructure

April 8, 2024