MARKET COMMENTARY | For Week Ending 6/17
Natural gas advances as hot temperatures boost demand.
With extreme heat in the triple digits expected to blanket the Southwest heading into the weekend and boost natural gas demand, traders drove gas prices 2.9 cents higher to a settlement of $2.585 per MMBtu. Crude oil moved between positive and negative territory as traders continued to digest Friday’s Baker Hughes report that showed a second weekly uptick in oil rigs. By day’s end, the West Texas Intermediate (WTI) July contract eased 19 cents lower to $48.88 per barrel. Equity markets kicked off the week on a down note as investors positioned ahead of Wednesday’s FOMC monetary policy meeting announcement.
The Mexican government awarded Spectra Energy and TransCanada a $3.6 billion contract to build a natural gas pipeline to the Mexican port city of Tuxpan, Veracruz. The pipeline would be able to carry 2.6 Bcf/day of natural gas to support Mexico’s budding gas-fired electric generation fleet. During the day’s trade, natural gas climbed 1.9 cents to $2.604. Equity and crude oil markets slumped as cautious investors prepared for the outcome of the Fed’s monetary policy meeting. Oil prices slid 39 cents lower to $48.49. The U.S. dollar benefited from the risk-off trading session and pressed higher.
Natural gas traders took positions ahead of the following day’s storage report and prices dipped 0.9 cents to $2.595. The Energy Information Administration (EIA) reported a 1.0 Mb decline in domestic oil inventories. Even though it was the fifth consecutive drop in oil supplies, prices fell 48 cents to $48.01. The Federal Reserve held interest rates steady, citing concerns over the sluggish labor market, low productivity growth, and potential instability brought on by the Brexit vote.
The EIA reported a slightly higher-than-expected 69 Bcf build to natural gas storage. As a result, the cost of gas lost 1.5 cents to close at $2.580. Global economic concerns associated with the U.K.’s vote on whether to exit the European Union pushed crude $1.80 lower to $46.21. Equities managed to halt a five-day slide and land in positive territory.
With a supportive weather forecast in view, natural gas traders propelled prices 4.3 cents higher to $2.623. Crude managed to recoup most of the prior day’s losses, ending the session $1.77 higher at $47.98. Conversely, U.S. stocks gave back Thursday’s gains as worries over next week’s U.K. vote and the Fed’s meager assessment of the economy weighed on shares.
Investors will focus on Thursday’s so-called Brexit vote on the U.K.’s status in the European Union. Natural gas traders will intently monitor the weather forecast to determine the effect on demand.