MARKET COMMENTARY | For Week Ending 6/10
Expected summer cooling demand propels natural gas higher.
With temperatures stretching well-above normal in the West and Central U.S., gas-fired electric generation increased as homes and businesses ramped up air conditioning usage. Natural gas jumped 6.8 cents higher to $2.466 per MMBtu. Oil supply disruption concerns in Canada and Nigeria, as well as a weaker U.S. dollar, helped lift the West Texas Intermediate (WTI) July contract $1.07 higher to $49.69 per barrel. Equity markets surged on the increased anticipation the Fed would delay a rate hike this month. Federal Reserve Bank of Atlanta President Dennis Lockhart said the slowing labor market and a British vote on EU membership should be considerations in pushing a rate hike to at least July.
Natural gas moved between small gains and losses after reaching a near six-month high before settling 0.8 cents lower at $2.474. Crude oil extended gains during the trading session, climbing 67 cents higher to $50.36. The uncertainty surrounding the timing of a potential interest rate hike held the U.S. dollar and equity markets to a tight trading range.
Natural gas traders took positions ahead of the following day’s storage report and the cost of gas dipped 0.6 cents to $2.468. The Energy Information Administration (EIA) reported a 3.2 Mb decline in domestic oil inventories. Crude traders pushed prices 87 cents higher to $51.23, the commodity’s highest settlement in 11 months. Stocks pressed higher with support coming from rising crude prices and a weaker dollar.
Natural gas soared 14.9 cents to $2.617 after the EIA reported a much lower-than-expected 65 Bcf build to natural gas storage for the week ending June 3rd. After settling at an 11-month high, crude oil markets consolidated and moved 67 cents lower to $50.56. Equities took a breather following three days of gains that pushed the major benchmarks above significant technical levels.
After the prior day’s 6% rally, the natural gas prompt month contract retreated 6.1 cents to end the week at $2.556. Equities drifted into negative territory after a cautious tone permeated the markets ahead of next week’s FOMC meeting and a UK vote on whether to exit the euro zone. Crude oil markets tracked with downtrodden equity markets and fell $1.49 to $49.07.
The Federal Reserve has a highly anticipated monetary policy meeting this week that will be sure to garner the attention of investors. Natural gas traders will continue to monitor weather forecasts and storage reports for signs of rebalancing supply and demand conditions.