Bullish factors at play in the diesel, natural gas markets

(Kara Oosterhuis/RealAgriculture)

While the energy markets should be focused on supply and demand fundamentals, nagging economic factors and volatility in geopolitics are getting all the attention right now.

That’s according to Phil Flynn, author of the Energy Report, who says banking stress in the U.S. and overseas, inflationary costs, and continued unrest in Ukraine and Sudan is driving the energy market.

Flynn says that the invasion of Ukraine last March reflects a greater upheaval in the global energy order of things, and is being driven by, at least in part, by the U.S. government’s current push to reduce its reliance and use of fossil fuels.

“When the United States pulled back from that global fossil fuel dominance, the rest of the world seemed to fall apart — whether it be the war in Ukraine, which had a huge energy component to it. Russia made sure that Europe was basically dependent on them for energy, and they used that as a weapon against the rest of Europe,” he says.

At the same time that the U.S.’s relationship with Saudi Arabia is cooling, we’re seeing a move towards other entities getting closer, i.e. Russia, China, Saudi Arabia, and Iran.

All of this, plus tight supply in the U.S. and other markets, spells a continued upward bias for the diesel and overall fuel market, Flynn says.

Moving to natural gas, Flynn adds that anyone in this market for the last 18-months needs a seatbelt for all the whiplash they’ve endured. When the stress all lined up ahead of last winter to push prices higher, Mother Nature helped (for once) and sent mild temps to many areas of North America and Europe, tanking demand and prices at the same time.

But what’s to come?

“I’m seeing early warning signs right now that maybe the bearishness in the natural gas market is coming to an end. And we’re seeing that mainly because we’re seeing the export market for LNG heat up again, we’re seeing the Freeport export terminal come back online, that should level the playing field. That doesn’t mean we’re gonna go back to $10. But I think our days of natural gas gone below $2 is probably over as well,” Flynn says.

Hear the full analysis with Phil Flynn, below, or download for later!

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