Energy Market Watch: August 15, 2016

Jonathan Lee

MARKET COMMENTARY | For Week Ending 8/12
Natural gas falls 6.8% week-over-week to its lowest level since early June.

MONDAY 8/8
As natural gas traders grappled with the supply and demand balance, prices slid 2.4 cents lower to settle at $2.748 per MMBtu. Crude oil marched $1.22 higher to $43.02 per barrel after some Organization of Petroleum Exporting Countries (OPEC) members renewed their calls to restrain output amid the global supply glut. The U.S. dollar added to Friday’s gains on expectations the Federal Reserve would look to raise interest rates in their September meeting. Meanwhile, equities were slightly lower after ending the prior week near record highs.

TUESDAY 8/9
Even though summer cooling demand remained in full force, traders shifted their focus to the current oversupply situation and the September natural gas contract fell 13.3 cents to $2.615. Crude oil fluctuated between positive and negative territory as traders considered the possibility of an OPEC production cap. The cost of oil declined 25 cents to $42.77. Equities drifted sideways after bumping up against record highs as investors had little fresh economic data to digest until retail sales data was released at the end of the week.

WEDNESDAY 8/10
Natural gas retreated 5.4 cents to $2.561 as traders positioned ahead of the Energy Information Administration’s (EIA) weekly storage report. The EIA revealed an unexpected 1.1 Mb increase in domestic inventories, the third consecutive weekly build, and oil prices dropped $1.06 to $41.71. Stocks operated in the red with downside pressure coming from lackluster corporate earnings reports and sliding energy stocks.

THURSDAY 8/11
The EIA reported a slightly larger-than-expected 29 Bcf injection into storage. The surplus continues to decline but remains at 12.2% compared to last year. Gas prices settled a penny lower at $2.551. Oil soared $1.78 to $43.49 after a report by the IEA projected global production of crude oil would lag behind demand by almost 1 million barrels a day during the second half of the year. The Dow, S&P 500, and NASDAQ recorded a trifecta of record closes, the first time the indexes jointly closed at record levels since December 31, 1999.

FRIDAY 8/12
Natural gas snapped a six-day losing streak and rebounded 3.5 cents to end the week at $2.586. Saudi Arabia’s Energy Minister said they would discuss potential production cap coordination in their September meeting. As a result, crude jumped $1.00 higher to $44.49. Lackluster retail sales data had equity markets pull back from record highs.

LOOKING AHEAD

Oil traders will have a full week of U.S. economic reports to comb through to help gauge future oil demand. Natural gas traders will closely monitor weather forecasts for signs of increased power sector demand.

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