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Oil Prices Could Rise Further On Short-Covering

Friday, August 12 2016

In the latest edition of the Numbers Report, we’ll take a look at some of the most interesting figures put out this week in the energy sector. Each week we’ll dig into some data and provide a bit of explanation on what drives the numbers.

Let’s take a look.

1. Natural gas production falling

- Natural gas consumption in the U.S. electric power sector broke a new record on June 21, hitting 40.9 billion cubic feet. The rapid decline of coal in the power sector is leading to much stronger demand for gas.
- At the same time, natural gas production is declining in the U.S., with all major shale basins posting declines.
- Only a few months ago, natural gas markets looked extraordinarily oversupplied, with inventories rising to their highest levels in decades.
- But the combined effect of rising demand and falling supply has suddenly tightened gas markets. The EIA reported a storage drawdown in August – the first draw on inventories during summertime in a decade – which suggests that prices could rise sooner than many had expected. Autumn months sees less demand, but the peak winter season could bring higher prices.

2. Surge in commodity investment comes to a halt

(Click to enlarge)

- The bust in commodities that began in 2014 caused capital inflows into the sector to plummet in 2015, but the downturn in investment bounced back this year as investors tried to…

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