EBC Markets Briefing | Fund managers buy the dip in gas rather than oil
Oil prices eased in early trade on Tuesday, extending their losses from the previous session when prices fell to their lowest in four months, as investors worried about supply ticking up later in the year.
Brent closed below $80 for the first time since 7 Feb, after falling more than 3% on Monday. The OPEC+ decision to extend the existing output cut into 2025 was not enough to lure investors back in.
Inauspicious signs of weak demand were flashing in the market. The average gasoline price in the US declined 5.8 cents per gallon to $3.50 per gallon on Monday, according to GasBuddy data.
Portfolio investors purchased petroleum contracts for the first time in seven weeks as traders bet against a possible price jump ahead of the OPEC+ meeting.
Most of the purchases came from closing out previous bearish short positions rather than creating new bullish long ones. Fund managers remained sceptical about the likelihood of a major rally.
But they have become progressively more bullish about the outlook for US gas, anticipating that strong demand from gas-fired generators and the restart of LNG export facilities will eliminate excess inventories.
The benchmark gas price has stablished above its 200 SMA. Further rally may be susceptible to the key resistance seen at $2.8250.
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