Energy Market Watch: July 18, 2016

Jonathan Lee

MARKET COMMENTARY | For Week Ending 7/15
Natural gas range-bound while hot temperatures remain.

Weather forecasts called for above-normal temperatures throughout the eastern three-fourths of the U.S., with below-normal temperatures in the Northwest. Despite the more supportive weather outlook, natural gas prices fell 9.9 cents to $2.702 per MMBtu. West Texas Intermediate (WTI) crude oil slid 65 cents lower to $44.76 per barrel on evidence Asian refiners were beginning to cut crude orders due to an economic slowdown in the region. Equities extended the prior Friday’s jobs-report rally and the S&P 500 and Dow Jones posted new all-time highs.

Natural gas recouped some of Monday’s losses and ended the day 3.2 cents higher at $2.734. WTI jumped $2.04 to $46.80 after OPEC increased its forecast for global demand growth in 2017 to 1.2 Mb/ day. The U.S. dollar weakened and the pound and euro gained on news Theresa May was set to succeed David Cameron as the U.K. prime minister. Equities continued to press deeper into record territory on the positive developments.

Natural gas trended 0.3 cents higher to $2.737 as traders prepared for the following day’s storage report. The Energy Information Administration (EIA) revealed a smaller-thanexpected 2.5 Mb draw down in domestic inventories. The price of oil plunged $2.05 to end the day at $44.75. Stocks traded in a mixed fashion.

Natural gas dipped a penny lower to $2.727 after the EIA revealed a slightly stronger-than-expected 64 Bcf injection of gas into storage. The market consensus prior to the report’s release called for a 59 Bcf build. The Dow and S&P 500 soared to new record heights with support coming from stronger-thanexpected corporate earnings, positive economic data, and eased Brexit concerns. Crude rebounded 93 cents to $45.68 as the commodity tracked with upbeat equity markets.

The weather forecast remained supportive for increased power sector demand through the end of July. As a result, gas climbed 2.9 cents to $2.756. Crude traders received some better-than-expected economic data out of the U.S. and China, which helped lift future demand prospects. The commodity ended the day 27 cents higher at $45.95. Even though there was a good amount of positive economic data to digest, investors shifted to a risk-off mode after Thursday night’s terrorist attack in Nice, France, in which at least 84 people were killed.


Natural gas traders will closely monitor the weekly storage report as the current surplus continues to shrink.

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