Energy Market Watch: August 22, 2016

Jonathan Lee

MARKET COMMENTARY | For Week Ending 8/19
Crude oil records seven-day win streak; natural gas ends the week mostly unchanged.

MONDAY 8/15
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.

TUESDAY 8/16
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.

WEDNESDAY 8/17
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.

THURSDAY 8/18
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.

FRIDAY 8/19
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.

LOOKING AHEAD

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.

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