MARKET COMMENTARY | For Week Ending 6/23
Natural gas retreats as weather forecasts turn bearish.
Natural gas moved sharply lower after bearish weather updates over the weekend dampened expectations for increased cooling demand into early next month. The July contract closed 14.3 cents lower at $2.894 per MMBtu. Crude oil fluctuated between small gains and losses as traders weighed the current oversupply situation with the Saudi Arabian oil minister’s view that the market would rebalance by the fourth quarter. By day’s end, prices lost 54 cents to settle at $44.20 per barrel. Rebounding technology shares helped boost equity markets during the session.
Natural gas traders covered short positions and the fuel rebounded 1.3 cents to $2.907. Crude oil plummeted to a new 2017 low and threatened to enter into a bear market on concerns over rising output from Libya and the U.S. The July WTI contract fell 97 cents to close and expire at $43.23. Equity markets pulled back from record territory amid falling energy shares.
Natural gas slid 1.4 cents to $2.893 as traders took positions ahead of the following day’s weekly storage report. The new prompt August WTI oil contract moved 98 cents lower to $42.53 after the Energy Information Administration (EIA) documented a 2.5 million barrel decline in domestic oil inventories, a 0.6 Mb dip in gasoline stocks, and a 1.1 Mb increase in distillates. Stocks retreated after a report revealed a 1.1% monthly decline in existing home sales.
Natural gas was marginally changed after the EIA reported a 61 Bcf injection into storage. The figure was neutral compared to last year’s 63 Bcf build, but bullish compared to the 5-year average 82 Bcf build. The fuel settled 0.1 cents higher at $2.894. Crude oil rebounded 21 cents to $42.74 even though U.S. production climbed to 9.35 Mb last week. Healthcare and biotech stocks helped lift the broader markets higher after the Senate released a discussion draft of their health-care bill, but the major indices erased gains prior to the closing bell.
Natural gas continued to firm as weather forecasts for the next 6-14 days took a less bearish stance than earlier in the week. As a result, prices climbed 3.5 cents higher to $2.929. Crude oil gained 27 cents to end the week at $43.01 after Tropical Storm Cindy caused about 300,000 barrels/ day of Gulf of Mexico oil production to be shut in. Stocks struggled to find direction during the session amid the release of mixed economic data.
Crude oil and natural gas traders will continue to pay close attention to weekly storage reports to weigh the supply and demand balance.