MARKET COMMENTARY | For Week Ending 9/23
Natural gas stretches to 20-month high mid-week; Fed leaves rates unchanged.
Updated short-term weather forecasts called for above-normal temperatures in the eastern third of the nation and along the West Coast. Below-normal temperatures were expected in the South Central and Mountain West. Natural gas started the week 1.4 cents lower at $2.934 per MMBtu. Unrest in Libya propelled oil prices 27 cents higher to settle at $43.30 per barrel. After Libyan officials said they planned to ship oil from a long-closed port last week, violence erupted in the region and put shipments on hold. Investors maintained a sharp focus on the week’s two-day FOMC monetary policy meeting, which concluded Wednesday afternoon.
Hot weather in the East had front month natural gas testing waters above $3.00 for the first time since May 18, 2015. Natural gas eventually closed 11.3 cents higher at $3.047. The October WTI oil contract gained 14 cents before closing and expiring at $43.44. Equities stalled as many investors moved to the sidelines to await the central bank’s decision.
Natural gas traders took positions ahead of the following day’s weekly storage report and prices climbed a penny higher to $3.057. The new prompt November oil contract jumped $1.29 to $45.34 after the Energy Information Administration (EIA) revealed a 6.2 Mb drop in domestic oil inventories, which drove supplies to their lowest level since February. Equity markets soared late session after the FOMC left rates unchanged and also showed more confidence in the labor market, while describing economic growth as moderate.
The EIA reported a 52 Bcf build to natural gas storage for the week ending September 16th, which was mostly in line with expectations. Even so, natural gas retreated from its 20-month high and ended the day 6.7 cents lower at $2.990. Equity markets extended the prior day’s gains as investors continued to digest statements from the FOMC monetary policy meeting. Crude oil tracked higher with equity markets and the cost of crude increased 98 cents to $46.32.
Natural gas slid 3.5 cents lower to a settlement of $2.955. The fuel’s run-up was inspired by unseasonably warm temperatures and a shrinking surplus, but the week’s storage injection brought the rally to a close. Crude oil floundered on skepticism OPEC members would reach an agreement on production cuts this month. As a result, prices dropped $1.84 to $44.48. Equity markets operated in negative territory, but still managed to end the week on the upside.
Oil traders will have a handful of economic reports to digest. Natural gas will likely encounter some volatility as the October contracts heads toward expiration on Wednesday.