Energy Update: Brent Spike Coming?

| May 5, 2014 | 0 Comments

oilThe next few weeks could get very interesting for the energy markets.  Crude oil is poised for a potentially sizeable bullish move thanks to quickly changing geopolitical factors.  What’s more, recent natural gas data points to continued bullishness as producers try to play catch up.

Let’s look at the details…

As you may have heard, the situation in Ukraine is basically going to hell in a handbasket.

Pro-Russian separatists clashed with Ukrainian forces this past weekend, killing 4 and wounding dozens.  What’s more, at least 30 were killed when a trade union building was set afire on Friday.

There’s plenty of blame being thrown around for whom is responsible.  Ukraine claims Russia is acting behind the scenes to escalate the whole affair.  On the other hand, Russia maintains Ukraine is acting criminally by attacking its own people.

Unfortunately, the fog of war makes it challenging to really know the truth of the matter.

The only certainty is this…

Energy investors are growing increasingly wary. Some analysts believe the situation could send Brent, the European crude benchmark, soaring to $125 a barrel or higher.

While this scenario is unlikely, it’s not out of the realm of possibility…

If Europe and the US move forward with stronger economic sanctions against Russia, Putin could respond by reducing energy supplies to Europe.  As you may know, Russia is a major supplier of oil and natural gas in the region.  If Putin were to yank supplies from its western neighbor, energy prices would quickly go through the roof.

Keep a close eye on the United States Brent Oil Fund (BNO).  If Putin does the unthinkable, the commodity ETF will rise in lockstep with Brent.

Now let’s look at natural gas…

Last Thursday’s EIA inventory report revealed US storage levels jumped by 82 billion cubic feet (bcf), which is above analysts’ estimates of 75 bcf.  More importantly, last week’s build is well above last year’s injection of 43 bcf and beyond the 5-year average build of 53 bcf.

This is the first time this spring that the EIA’s data revealed a big dent in the massive natural gas supply deficit.

Inventories are still 44% below last year and 50% below the 5-year average.  As a result, natural gas producers are faced with an enormous task to refill US storage levels to the 3.6 trillion cubic foot level needed before next winter.

But with the summer cooling season right around the corner, there’s a chance they simply won’t be able to catch up.

Obviously, Mother Nature will play a very important role in the direction of natural gas in coming months!

As you can see, there’s plenty of action in the energy markets.  Stay tuned to Commodity Trading Research for further insight into these essential commodities.

Until Next Time,

Justin Bennett

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Category: Brent Crude, Crude Oil, Energy

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.