MARKET COMMENTARY | For Week Ending 5/19
Bearish weather forecast zaps cooling demand expectations.
Natural gas fell 7.5 cents to $3.349 per MMBtu as traders locked in profits following the fuel’s climb to its highest level in over a month. Crude oil jumped $1.01 to $48.85 per barrel after energy ministers from Saudi Arabia and Russia announced they would both support a nine-month extension to the production cut deal. Rising energy shares helped lift equity markets higher on the day despite economic data that showed a monthly contraction in the New York region’s manufacturing sector.
Updated weather forecasts showed a large swath of below-normal temperatures expanding into the East that had the potential to limit cooling demand at the start of June. As a result, natural gas dove 11.9 cents lower to $3.230. Crude fluctuated between small gains and losses before eventually declining 19 cents to $48.66 as traders assessed the prospect of an OPEC production cut extension. Stocks faced headwinds from geopolitical uncertainty and a weaker-than-expected housing starts report.
Natural gas continued to sink lower as weather forecasts continued to suggest cooling demand would be weaker through the end of May. By day’s end, the June contract lost 3.8 cents to settle at $3.192. Crude oil climbed 41 cents higher to $49.07 after the Energy Information Administration (EIA) documented a 1.8 Mb decline in domestic oil inventories, a 0.4 Mb decline in gasoline stocks, and a 1.9 Mb decline in distillates. Equities plummeted as investors shifted to a risk-off mode with political uncertainty building in the nation’s capital.
Natural gas dipped a penny lower after the EIA reported a larger-than-expected 68 Bcf injection into storage. However, the deficit compared to last year widened to 13.7%. Crude gained 28 cents to $49.35 as traders continued to weigh declining U.S. stockpiles against the broader oversupplied market. Equity markets rebounded after the Federal Reserve Bank of Philadelphia reported accelerating growth in the region’s manufacturing sector.
After sliding 7.1% in the previous four sessions, the June natural gas contract rebounded 7.4 cents to $3.256 as traders covered short positions. Crude oil settled 98 cents higher at $50.33 as the U.S. dollar dropped to its lowest level against major rivals since November amid ongoing political uncertainty in Washington D.C. Equity markets pressed higher with support from rising energy and mining shares.
Crude traders will pay close attention to OPEC’s production meeting set for May 25th. Natural gas traders will continue to monitor weather forecasts to gauge upcoming demand.