LNG: European Gas Down On Technical Selling But Refilling Worries Dominate
Feb-11 23:24
European gas continued to climb on Tuesday reaching a high of EUR 59.39 before overbought signals drove a move lower to finish the day down 2.8% at EUR 56.42. Prices are still up 6% in February and 15.8% this year. Colder weather is forecast for mid-February, which will increase heating demand.
- Norwegian energy firm Equinor estimates that European gas storage levels could fall to 30% this winter in a worst case scenario and that the region will require up to 350 additional LNG shipments in 2025 to refill ahead of next winter (Bloomberg). Some European governments are looking at ways to encourage refilling storage, which is now around 50%.
- Summer/spring refilling remains a concern with gas prices over those months continuing to exceed those for next winter. March and April contract prices fell yesterday, while those for the subsequent months including 2025/2026 winter rose further. The region is going to be highly sensitive to global production outages over the year.
- US natural gas rose 1.9% to $3.51 after an intraday high of $3.58 due to forecasts for colder weather across much of the US. It is now up over 15% this month and 13.3% in 2025. Gas demand growth continues to be elevated up 28.1% y/y on Tuesday as heating demand rises.
- Increased demand has driven Asian LNG prices higher.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
US TSYS: Tsys Sell-Off Following Strong Jobs & Unemployment Rate Numbers
Jan-12 23:14
- Treasuries ended Friday with steep bear-flattening move as Fed-dated OIS contracts repriced to levels anticipating just one 25bp cut this year. While the selloff was sparked by strong December employment, the 2 to 7yr yields all rising over 10bps, with the 3yr the worst performing closing the session 13bps higher. Tsys futures were hit hard with TU closing -08⅝ at 102-16⅜, while TY closed -0-26+ at 107-12+ well through support and has confirmed a resumption of the downtrend.
- There will be no cash trading in Asia today, with Japan out for a Public holiday. On Friday, cash yields closed 1-13bps higher. the 2yr closed +11.6bps at 4.379%, while the 10yr closed at +7bps at 4.675% now the highest level since Nov 2022. The 2s10s closed back below 40bps, falling 4.7bps at 37.582, while the 5s30s & 2s30s both fell about 10bps.
- The 256k in December leaves a strong recent trend, with 255k in Sep, an average of 128k for those two months (initially 132k) before surprisingly reaccelerating again. Unemployment rate: 4.086% in Dec after very small downward revisions in the prior two months, with 4.23% in Nov (initially 4.246%) and 4.14% in Oct (initially 4.15%).
- Several big banks shifted their Fed forecasts to fewer or later-starting cuts, with Bank of America saying they no longer expect any.
- Projected rate cuts through mid-2025 have retreated since this morning's data, current vs. morning levels* as follows: Jan'25 at -0.7bp (-1.7bp), Mar'25 -6.3bp (-10.1bp), May'25 -10.5bp (-15.9bp), Jun'25 -18.2bp (-25.6bp), Jul'25 -20.2bp (25.5bp).
- The calendar is light on today, with just NY Fed 1-Yr Inflation Expectations & Federal Budget Balance, focus will turn to PPI & CPI later in the week.
AUSSIE BONDS: ACGBs Track US Yields Higher After Strong NFP Report
Jan-12 22:39
ACGBs (YM -9.0 & XM -5.0) are weaker with the 3/10 curve flatter after US tsy yields finished Friday’s session sharply higher following larger-than-expected December non-farm and private payroll gains and a dip in the unemployment rate. The US 2-year yield rose 12bps to 4.38%, while the 10-year rose 7bps to 4.76%, the highest since November 2023.
- This week, CPI and PPI inflation measures are on Wednesday and Thursday respectively.
- Cash ACGBs are 5-9bps cheaper, led by the short-end, with the AU-US 10-year yield differential at -17bps.
- Swap rates are 3-7bps higher, with the 3s10s curve flatter.
- The bills strip has bear-steepened, with pricing -3 to -9.
- RBA-dated OIS pricing is 2-10bps firmer across meetings today. A 25bp rate cut is more than fully priced for April (109%), with the probability of a February cut at 69% (based on an effective cash rate of 4.34%).
- Today, the local calendar will see Melbourne Institute Inflation and ANZ-Indeed Job Advertisements data.
- AOFM Bond issuance will resume this week, with A$800mn of the 3.50% 21 December 2034 bond to be sold on Wednesday and A$700mn of the 2.75% 21 November 2027 bond to be sold on Friday.
ASIA: AUD/NZD Held Steady On Friday, Continues To Trade In Recent Range
Jan-12 22:30
- AUD/NZD fell 0.04% on Thursday to 1.1060 and remains trading within the past 3 month range of 1.1000-1.1100, while the AU-NZ 2yr swap remains trading near its highest levels for the past year.
- The USD traded higher on Friday, rising for a fourth day, reaching its highest level since Nov. 2022 after the December US jobs report exceeded estimates by a wide margin. The NZD and AUD were the worst performing G10 currencies on Friday.
- Initial resistance is 1.1100 (round number), with a break here opening a move to 1.1150 (July Highs), to the down side a break below 1.1055 (20-day EMA), would open a move to retest 1.1000 which has acted a key support for the past 3 months.
- RBNZ dated OIS currently pricing in 49bps of cuts at the Feb meeting, while RBA Dated OIS is pricing in a 71% chance of a 25bps cut in Feb.
- Melbourne Institute Inflation & ANZ-Indeed Job Advertisements are out a bit later this morning.
