MARKET COMMENTARY | For Week Ending 8/26
Increased power sector demand fuels natural gas’ 11.1% week-over-week rally.
Natural gas looked to recoup all of the prior Friday’s losses as updated weather forecasts called for another round of elevated heat across the eastern U.S. in the next week. The September contract gained 9.5 cents to settle at $2.679 per MMBtu. Concerns over rising Iraqi oil exports and fears a recent bull market in oil prices would prompt more U.S. shale oil players to return weighed on the commodity. The September contract fell $1.47 to close and expire at $47.05 per barrel. Equity markets stalled as investors turned cautious ahead of Friday’s symposium of Federal Reserve policy makers and economists in Jackson Hole, WY.
Natural gas continued to move higher on the supportive power sector demand outlook and the cost of gas jumped 8.2 cents to $2.761. Crude oil traders pared early losses even as oversupply concerns remained. The new prompt October WTI contract climbed 69 cents to $48.10. Better-than-expected corporate earnings reports and the best reading on new home sales in 8 years helped propel stocks higher on the day.
Strong power sector demand expectations spurred natural gas another 3.5 cents higher to $2.796. The Energy Information Administration (EIA) reported an unexpected 2.5 Mb increase to domestic oil inventories. As a result, oil prices fell $1.33 to end the day at $46.77. Equity markets traded in negative territory after existing home sales data did little to inspire buying.
Natural gas pressed 5.0 cents higher to $2.846 after the EIA reported a smaller-than-expected 11 Bcf injection into storage. Crude oil garnered support from news that Iran and Ecuador were discussing production caps to help stabilize prices. The October WTI contract settled 56 cents higher at $47.33. Equities traded in a tight range as investors digested a basket of positive economic data and looked ahead to Fed Chairwoman Janet Yellen’s speech the following day.
An improving supply and demand balance helped natural gas add 2.5 cents to end the week at $2.871. Federal Reserve Chairwoman Janet Yellen delivered a highly anticipated speech at the conclusion of the central bank’s annual symposium in Jackson Hole, Wyoming. She said the case for a federal funds rate increase has strengthened in recent months and that a hike could happen this year. Equities shifted lower as a result, while crude oil markets climbed 31 cents to $47.64.
Investors and oil traders will pay close attention to Friday’s Employment Situation report. Natural gas traders will continue to monitor the weather forecast for signs of increased power sector demand.