MARKET COMMENTARY | For Week Ending 6/24
Natural gas jumps 49% in Q2 2016, its strongest quarterly increase since 2005.
Strong power sector demand helped natural gas begin the week on a positive note. The July prompt month contract gained 5.4 cents to $2.716 per MMBtu. Meanwhile, demand concerns brought on by the Brexit vote and a stronger U.S. dollar pushed crude oil down to a 1-week low. The August West Texas Intermediate (WTI) contract shed $1.31 to close at $46.33 per barrel. For the second trading session following the British vote to exit the European Union, investors dumped riskier investments and equity markets plunged as a result.
Natural gas continued to press higher as weather forecasts remained supportive for increased power sector demand and on news of a large explosion at a natural gas refining plant in Pascagoula, Mississippi the night before. The July contract rocketed 20.1 cents higher to close and expire at $2.917. Equity and crude oil markets rebounded following the two-day Brexit-induced rout after the Commerce Department reported the U.S. economy grew at a slightly better pace in the first quarter than originally estimated. Oil prices climbed $1.52 to $47.85.
Natural gas traders took positions ahead of the following day’s storage report and the new prompt August contract slid 2.7 cents lower to $2.863. Crude oil traders drove prices $2.03 higher to $49.88 after the EIA reported a larger-than-expected 4.1 Mb decline in domestic oil inventories. Stocks extended the prior day’s gains as investors seemed willing to put Brexit on the backburner and wait for more clarity and details on the timing of the exit.
Natural gas climbed 6.1 cents higher to $2.924 after the EIA reported a smaller-than-expected 37 Bcf net injection into storage. Oil pulled back from a strong two-day rally as downside pressure coming from a stronger dollar dragged prices $1.55 lower to $48.33. Equity markets, however, continued to stage a postBrexit rally and recouped much of the losses following the vote.
On the first trading day of the third quarter, natural gas prices gained another 6.3 cents to end the week at $2.987. Stocks pushed higher ahead of the extended weekend after the ISM revealed a positive manufacturing report. Crude rebounded 66 cents higher to close at $48.99.
Markets are closed Monday in observance of the Fourth of July holiday. When trading resumes, investors will likely look for any European Union developments, while natural gas traders will continue to pay close attention to the weather forecast to gauge upcoming demand.