Energy Market Watch: September 12, 2016

Jonathan Lee

MARKET COMMENTARY | For Week Ending 9/9
Natural gas fluctuates as traders gauge the supply and demand balance.

The markets were closed in observance of Labor Day.

Even though hot temperatures were likely to boost power sector demand during the week, natural gas traders drove prices 7.5 cents lower to $2.717 per MMBtu as belownormal temperatures were forecast to move into the Central U.S. in the coming weeks. The crude oil market moved between small gains and losses before eventually settling 39 cents higher at $44.83 per barrel. Skepticism over whether major producers could reach a deal to freeze oil production grew after talks between Russia and Saudi Arabia failed to provide concrete statements on further cooperation. Equity markets pressed higher, with gains in telecom and utilities shares offsetting losses in financials.

Natural gas continued to slide as a moderating weather forecast had traders selling off their bullish bets. Prices ended the day 4.1 cents lower at $2.676. The Energy Information Administration’s (EIA) Petroleum Status Report was released one day later than normal due to the Labor Day holiday. During the day’s trade the October West Texas Intermediate (WTI) oil contract climbed 67 cents higher to $45.40. U.S. stocks shifted into negative territory ahead of the release of the Federal Reserve’s Beige Book. The book is produced 2 weeks before the FOMC monetary policy meeting, so it tends to provide some clues on the Fed’s next steps on interest rates.

Natural gas soared 13 cents to $2.806 after the EIA reported a smallerthan-expected 36 Bcf injection into storage, bringing the overall level to 3,437 Bcf. The storage surplus narrowed to 6.0% compared to last year and 9.8% compared to the five-year average. Crude oil also jumped $2.12 higher to $47.62 after the EIA reported a massive 14.5 Mb decrease to domestic oil inventories. Stocks, however, retreated after the European Central Bank failed to inspire investors by not announcing additional measures to boost the region’s sluggish economy.

Rate hike fears were stoked after Boston Federal Reserve President Eric Rosengren said a reasonable case can be made for raising interest rates. Equity markets came under intense selling pressure, while the U.S. dollar surged. Crude oil tracked with equities and lost $1.74 to close at $45.88. Natural gas took a breather following the prior day’s storageinspired rally. The cost of gas dipped 0.9 cents lower to end the week at $2.797.


Equity and crude oil traders will likely take positions ahead of the following week’s Fed monetary policy meeting. Natural gas traders will continue to look for signs of increased demand during the shoulder season.

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