Weekly Energy Market Watch | July 16, 2018

Jonathan Lee, Senior Energy Market Intelligence Manager at ENGIE Insight

MARKET COMMENTARY | For Week Ending 7/13
Natural gas loses ground on cooler temperature outlook.

Natural gas lost 3.0 cents to settle at $2.828 per MMBtu as meteorologists forecast cooler summer temperatures for the middle of the country during the next couple weeks. Crude oil for August delivery inched 5 cents higher to $73.85 per barrel on lingering supply outages in Libya. Equity markets rocketed higher as investors focused on the prior Friday’s solid jobs report and the upcoming corporate earnings season.

The August-2018 NYMEX natural gas contract fell another 4.0 cents to $2.788 with downside pressure coming from record dry gas production and cooler temperature outlooks for July. Oil prices climbed to a three-and-a-half year high as supply issues across several major producing countries tightened the global market. The August-2018 WTI contract closed 26 cents higher at $74.11. Equities continued their advance with support coming from consumer staple and utilities stocks.

Natural gas rebounded 4.1 cents to $2.829 as traders positioned ahead of the following day’s storage report, which was expected to show a build in the mid-50’s and widen the current storage deficit. Crude tumbled $3.73 to $70.38 despite a massive 12.6 Mb decline in U.S. oil inventories as Libyan output was expected to increase and on news Saudi Arabian production neared levels not seen since 2016. Equity markets turned lower on escalating trade tensions after the U.S. said it would impose another $200 billion in tariffs on Chinese goods.

Natural gas slipped 3.2 cents to $2.797 even after the EIA reported a slightly smaller-than-expected 51 Bcf build in storage, which increased the deficit to the five-year average to 519 Bcf. Crude steadied after the prior day’s rout and settled 5 cents lower at $70.33. Equities recovered prior session losses on merger and acquisition news from the tech sector.

Natural gas moved toward lower technical support levels as short-term weather forecasts remained tilted to the bearish side and prices closed 4.5 cents lower at $2.752. Crude oil gained 68 cents to $71.01 after the International Energy Agency said they would be ready to access emergency supplies if recent outages threatened the world’s space capacity cushion. Stocks ended the week on the upside after a solid start to the corporate earnings season.

Natural gas will likely struggle to find its footing as long as weather forecasts point to milder conditions in the mid-continent.

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