MARKET COMMENTARY | For Week Ending 2/10
Bearish weather forecast weighs on natural gas heating demand outlook.
Updated weather forecasts turned increasingly bearish for heating demand during the following two weeks. As a result, the March contract eased 1.3 cents lower at $3.050 per MMBtu. Oil prices declined 82 cents to $53.01 per barrel after industry data showed oil rigs grew by 17 to 583 rigs. Equity markets inched lower after posting their best day in nearly two months on the prior Friday.
After touching its lowest point since late November, natural gas rebounded after weather forecasts showed a patch of below-normal temperatures moving into the Northeast. With the prospect of increased heating demand in the major consuming region, prices climbed 8.0 cents to $3.130. Crude prices fell 84 cents to $52.17 as traders grew concerned increasing U.S. production would outweigh cuts made by OPEC producers. Upbeat fourth quarter corporate earnings reports helped drive equity markets higher on the day.
Natural gas seesawed between small gains and losses as traders took positions ahead of Thursday’s storage report. By day’s end, natural gas dipped 0.4 cents to $3.126. Crude oil pared early losses even after the Energy Information Administration (EIA) reported a massive 13.8 million barrel increase in domestic oil inventories. The cost of petroleum edged 17 cents higher to $52.34. Stocks were mostly in the red as investors digested a mixed bag of corporate earnings reports.
Natural gas finished the day 1.5 cents higher at $3.141 after the EIA documented a 152 Bcf withdrawal from storage. The figure was slightly above the market consensus, last year, and the five-year average. Equity markets soared after President Trump signaled he would soon release details on his proposed tax cuts. Crude oil tracked higher with equities on hopes Trump’s tax plan would spur demand for the commodity. The March WTI contract gained 66 cents to close at $53.00.
Natural gas faced strong headwinds as above-normal temperatures had the potential to linger into lateFebruary. The front-month contract lost 10.7 cents to settle at $3.034. Oil prices jumped 86 cents to $53.86 after the International Energy Agency reported that OPEC production slid to 32.06 Mb/day in January, a decline of about 1 Mb/day from their October baseline. Equities stretched deeper into record territory with support coming from better-than-expected corporate earnings reports.
Crude traders will have a basket of economic data to digest mid-week. Natural gas traders will maintain their focus on the weather forecast for signs of below-normal temperatures.