MARKET COMMENTARY | For Week Ending 8/19
Crude oil records seven-day win streak; natural gas ends the week mostly unchanged.
The short-term weather forecast called for above-normal temperatures on the West and East Coasts, with below-normal temperatures throughout a large portion of the Central U.S. Even with the prospect of lower power sector demand, natural gas managed to edge 0.4 cents higher to $2.590 per MMBtu. Crude oil pressed $1.25 higher to $45.74 per barrel on hopes OPEC would reach an agreement on a production cap during their September meeting. With support from higher oil prices, equities went back on the offensive and stretched to new all-time record highs.
Natural gas continued to move higher after finding downside technical support the prior week. The front-month contract climbed 2.7 cents to $2.617. Oil traders extended the commodity’s winning streak even after Iran cast doubt on whether OPEC could reach a production cap agreement next month. The cost of oil increased 84 cents to $46.58. Stocks pulled back as investors weighed hawkish rate hike comments by New York Fed Reserve President William Dudley against rising oil prices.
Natural gas moved between small gains and losses throughout the day before eventually settling 0.2 cents higher at $2.619. The Energy Information Administration (EIA) reported a 2.5 Mb decline from domestic oil inventories and the prompt month contract closed 21 cents higher at $46.79. Equities rebounded during the day’s session as investors braced for the release of the FOMC minutes from the previous monetary policy meeting.
The EIA reported a smaller-than-expected 22 Bcf injection into storage. The surplus compared to last year narrowed to 10.9%, and gas costs gained 5.5 cents to $2.674. Crude oil moved back into bull market territory as the September WTI contract jumped $1.43 to $48.22. A bull market is defined by a 20% rise from a recent low. Stocks moved marginally higher with support coming from a batch of positive economic reports.
Natural gas snapped a five-day win streak and gave back all of the gains, ending the day 9.0 cents lower at $2.584, on concerns the market remained oversupplied. Meanwhile, crude oil extended its win streak to seven days. The commodity added 30 cents to end the week at $48.52. Equity markets drifted into negative territory to close out the week on a down note.
Investors and oil traders will have some late-week economic data to help determine near-term direction. Natural gas traders are likely to pay close attention to upcoming storage reports to gauge the supply and demand balance.