Gas Slides on Contract Roll and Milder Weather; Iran Risk and Weak Dollar Lift Crude

Crude rises to four-month high

• The WTI prompt-month contract rose $0.64 to $63.03/Bbl on Wednesday morning (7:30 AM CT)
• President Trump took to social media to threaten Iran with military action
• • Trump warned that if Iran refuses to negotiate a deal, “the next attack will be far worse!”
• The renewed threats have supported crude prices on Wednesday as the potential risk to Iranian supplies increases
• Surrounding Gulf states have emphasized the need for diplomacy, while Saudi Crown Prince Mohammed bin Salman said the kingdom would not allow its territory to be used for military operations
• A gauge of the dollar fell to its lowest level in nearly four years on Tuesday after Trump said he was not concerned about a weaker currency
• Recent dollar weakness has potentially magnified crude’s rally, suggesting that the observed price strength may reflect a combination of geopolitical risk and broader macro positioning
• The American Petroleum Institute reported that US crude inventories fell by 247 MBbls last week, with official government data due later Wednesday

Prompt month Feb natural gas is down -67.7c to $6.277/MMBtu (7: 30 AM CT)

• The Feb natural gas contract expires today, and the move lower is exacerbated by low liquidity
• March is trading 8c lower, around $3.74/MMbtu
• Weather forecasts are shifting milder from the first week of February
• • Temperatures are currently forecast to warm up relative to this week, but remain below the ten-year average for the next two weeks
• Gas production is normalizing, with output back above 100 Bcf/d this morning

Freeport LNG to potentially reschedule cargos due to extreme US heating demand

• As widespread cold drove natural gas prices higher, Freeport LNG began reducing feed gas on Saturday (BloombergNEF)
• This could reduce LNG exports for a few days
• Pipeline deliveries to US LNG export terminals rose Tuesday, halting a four-day decline
• • Inflows have risen to more than 17 Bcf/d, compared to 14.75 Bcf/d yesterday