Energy Market Watch: July 25, 2016

Jonathan Lee

MARKET COMMENTARY | For Week Ending 7/22
Natural gas struggles to break free from narrow trading range.

MONDAY 7/18
Triple digit temperatures in the Central U.S. continued to support increased gas-fired generation during the week. However, even with the solid outlook for power sector demand, natural gas ended the day down 3.4 cents at $2.722. West Texas Intermediate (WTI) crude oil lost 71 cents to $45.24 per barrel due to concerns over growing supply and diminishing demand. Upbeat corporate earnings reports from financial and tech companies put the Dow on track for another record close.

TUESDAY 7/19
Natural gas fluctuated in a narrow trading range, closing 0.6 cents lower at $2.728. WTI edged 59 cents lower to $44.65 as traders looked ahead to the following day’s Petroleum Status Report. The buck grew stronger, while stocks were mixed after downbeat German economic data caused investors to seek the relative safe haven status of the currency.

WEDNESDAY 7/20
Natural gas retreated 7.0 cents to $2.658 as traders waited for updated data on the storage situation. The market consensus had the headline figure coming closer to the five-year average figure for the first time in months. The expiring August WTI contract climbed 49 cents higher to $45.14 after the Energy Information Administration (EIA) reported the ninth consecutive decline in domestic inventories. With a lack of fresh economic data to digest, solid corporate earnings reports propelled stocks higher on the day.

THURSDAY 7/21
Natural gas added 3.4 cents to settle at $2.692 after the EIA revealed a slightly weaker-than-expected 34 Bcf injection of gas into storage. The surplus continued to shrink, currently 16.8% above last year and 20.6% above the five-year average. Oil prices tracked lower with equity markets. The new prompt September WTI contract fell $1.00 to $44.75. The Dow pulled back from record levels after momentum slowed following its nine-day winning streak. A batch of disappointing corporate earnings reports soured investor moods.

FRIDAY 7/22
A heat wave moving across much of the eastern half of the country drove natural gas 8.5 cents higher to $2.777. Temperatures topped triple digits in most areas, which boosted A/C usage and power sector demand. Crude oil lost 56 cents to settle at $44.19, its second consecutive weekly loss. Resurfacing Brexit concerns, a string of weaker-than-expected corporate earnings reports, and anticipation for next week’s Fed meeting had equities on the defensive for most of the day. But equities managed to land in positive territory by the closing bell.

LOOKING AHEAD

Market participants will pay close attention to the Fed’s two-day monetary policy meeting. Natural gas traders will monitor the nation’s temperatures for signs of increased cooling demand.

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