Energy Market Watch: July 11, 2016

Jonathan Lee

MARKET COMMENTARY | For Week Ending 7/8
Moderating temperature forecast in the West cools natural gas rally.

Markets were closed in observance of the Fourth of July holiday.

Natural gas carved out steep losses on the first day of the holiday-shortened week as weather forecasts pointed to lower demand in the coming weeks. The prompt August contract lost 22.3 cents to settle at $2.785 per MMBtu. Crude oil traders drove prices $2.39 lower to $46.60 per barrel on resurfacing concerns over Brexit and a stronger U.S. dollar. Investors fled to the safe-haven status of the dollar after the British pound slumped to a fresh 31-year low. Meanwhile, losses in energy and financial shares dragged equity markets lower.

Natural gas traders took positions ahead of the following day’s storage report and natural gas prices climbed 2.2 cents higher to $2.786. Crude oil traders also positioned ahead of the holiday-delayed Petroleum Status Report as expectations for the seventh-straight weekly decline in inventories offset a potential slowdown in demand. The August West Texas Intermediate (WTI) contract gained 83 cents before closing at $47.43. Equities traded marginally higher after the ISM’s nonmanufacturing report showed betterthan-expected monthly growth in the service sector.

The Energy Information Administration (EIA) reported a slightly smaller-than-expected 39 Bcf injection of gas into storage for the week ending July 1st. The figure did little to inspire price movement in either direction and natural gas prices dipped just 0.9 cents to $2.777. Crude fell $2.29 to $45.14 after the EIA revealed a smaller-than-expected 2.2 Mb drop in domestic oil inventories. Stocks bounced between positive and negative territory as investors digested U.S. economic data and looked ahead to Friday’s highly anticipated monthly jobs report.

Natural gas finished the day 2.4 cents higher at $2.801 as weather forecasts continued to point to increased power sector demand in the East. Equity markets soared after the Labor Department released an unexpectedly solid jobs report, which erased some recent labor market concerns. The 287,000 increase was the largest since last fall and offered some reassurance on economic conditions. Crude rebounded 27 cents to $45.41 as the commodity tracked with the upbeat sentiment in equity markets.


Equity and crude oil traders will have several major economic reports to digest late-week. Natural gas traders will continue to seek out signs of increased demand to determine near-term price direction.

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