US Natural Gas Falls and Brent Crude Tops $75

European and US Stocks Gain, First Citizens Bank to Buy Silicon Valley Bank Provides Relief to Banking Sector, Freeport LNG Plant Issues Cause Concern, Brent Crude Maintains Highs

By Ahmed Azzam | @3zzamous | 27 March 2023

  • European stocks gain nearly 1% led by bank shares, bouncing back from Deutsche Bank-triggered sell-off.

  • US natural gas futures hit 7-month low, despite record-high exports from Freeport LNG plant in Texas.

  • Brent crude futures climb above $75 per barrel, amid reassurances from US regulators and optimism over China's demand recovery.

What’s happened in the markets?

European stocks opened the week with a strong start, gaining nearly 1% with bank shares leading the way, bouncing back from a sell-off triggered by a significant drop in Deutsche Bank's shares on Friday. Market watchers will keep a close eye on the banking sector, but there was some relief as First Citizens Bank announced plans to acquire Silicon Valley Bank. On the other side of the world, US futures also pointed towards a positive open, while stocks in the Asia-Pacific region ended mixed.

Ifo Business Climate indicator for Germany in March 2023 rose to 93.3, the highest level since February 2022, exceeding market expectations of 91. This marks the fifth consecutive month of rising business confidence, despite the recent banking crisis, high prices, and borrowing costs. The current conditions subindex also increased to 95.4 from 93.9, and the expectations gauge climbed to 91.2 from a downwardly revised 88.4. Although 41.6% of businesses reported supply bottlenecks in March, fewer businesses expressed a desire to increase prices. Expectations in the industry have slightly decreased, but Ifo economists noted that a winter recession now seems less likely.

What to watch?

US natural gas futures hit a 7-month low, hovering around $2.1/MMBtu as warm weather and high inventories continued to weigh on demand. The EIA reported that underground storage contained 1,900 billion cubic feet of natural gas as of March 17, the highest level for this time of year since 2020. However, natural gas flows to LNG export plants were on pace to hit record highs, thanks in part to the reopening of Freeport LNG's Texas plant, which had been offline for some time. Despite this positive development, the company recently canceled some shipments due to problems with one of its liquefaction trains, raising concerns about how long it will take for Freeport LNG to fully resume operations.

Meanwhile, Brent crude futures surpassed $75 per barrel on Monday, building on gains from the previous week after US regulators provided reassurances that helped ease concerns about a broader financial crisis. While US authorities are considering an expanded emergency lending facility for the banking sector, investors remain wary of further market volatility. Bullish sentiment was supported by expectations that the Federal Reserve will soon end its tightening campaign and optimism over China's demand recovery. However, growing fears of a US recession and resilient Russian supply kept the international oil benchmark near its lowest levels since December 2021. JPMorgan Chase & Co. has predicted that Brent will break below $60 per barrel in the near future.