MARKET COMMENTARY | For Week Ending 6/24
Brexit leave vote unsettles equity and oil markets; natural gas stretches to 9-month high.
Natural gas jumped to a nine-month high, gaining 12.4 cents to $2.747 per MMBtu, as weather forecasts continued to show above-normal temperatures covering much of the country, which would likely boost gas-fired electric generation. Investors breathed a sigh of relief over Brexit concerns after polls released over the weekend showed voters were leaning more toward remaining in the European Union. Many analysts believed a U.K. exit from the EU would have a negative economic impact on the region. Equity markets soared and crude oil prices jumped $1.39 to $49.37 per barrel.
Natural gas moved between small gains and losses while weather forecasts continued to support increased demand. The July prompt month contract climbed 2.1 cents to $2.768. Brexit uncertainty and a stronger U.S. dollar weighed on West Texas Intermediate (WTI) crude oil and the July contract slipped 52 cents lower to close and expire at $48.85. The high amount of uncertainty regarding the Brexit vote held U.S. equity market gains to a minimum.
Updated weather forecasts were slightly less bullish on the day and the cost of gas dropped 9.1 cents to $2.677. Even though the Energy Information Administration (EIA) reported the fifth weekly decline in domestic oil inventories, the smaller-than-expected 0.9 Mb draw weighed on prices. The new prompt August WTI contract lost 72 cents to $49.13. Equity markets were unable to extend gains for the third consecutive day ahead of the Brexit vote the following day.
The EIA reported a slightly higher-than-expected 62 Bcf build to natural gas storage for the week ending June 17th. Even so, natural gas climbed 2.1 cents higher to $2.698. As with equity and currency investors, crude traders eyed the day’s Brexit vote. Many investors bet the U.K. would vote to remain in the EU. Stocks soared and crude jumped 98 cents to $50.11.
Natural gas ended the week on a down note and prices settled 3.6 cents lower at $2.662. Investors fled to safe-haven assets after the U.K. voters narrowly favored to end its membership in the European Union. Global markets floundered on fears over what a British exit from the EU would have on the region’s economy. Crude oil plummeted $2.47 to close at $47.64.
Investors and crude traders will continue to consider the fallout from the U.K. exit from the EU. Natural gas traders will look to Thursday’s weekly storage report to gauge the increased cooling demand’s effect on the nation’s supplies.