Weekly Energy Market Watch | October 15, 2018

Jonathan Lee, Senior Energy Market Intelligence Manager at ENGIE Insight

MARKET COMMENTARY | For Week Ending 10/12
Natural gas pulls back late-week after the storage report matches estimates.

MONDAY 10/08
Natural gas soared 12.4 cents higher to $3.267 per MMBtu with the potential for Hurricane Michael to reduce production in the Gulf of Mexico and on forecasts for cooler temperatures for much of the country in the 6-10-day period. Crude oil dipped 5 cents lower to $74.29 per barrel on reports the U.S. could grant waivers to some buyers of Iranian crude when oil sanctions go into effect next month. Equity markets traded in a mixed fashion during the session on concerns over climbing bond yields, which could result in steeper borrowing costs for corporations.

Natural gas held steady as traders continued to monitor production in the Gulf for signs of increased shut-ins. The November-2018 NYMEX contract settled 0.1 cents lower at $3.266. Meanwhile, crude gained 67 cents to $74.96 as oil operators in the Gulf evacuated 10 platforms and moved 5 rigs out of Hurricane Michael’s path, resulting in 324,190 barrels per day to be shut-in. Equities landed in the red with investors remaining focused on rising bond yields.

Natural gas closed 1.8 cents higher at $3.284 ahead of the following day’s storage report, which was expected to show a build in the low-90s. Oil prices fell $1.79 to $73.17 as traders priced in expectations of a third consecutive build in crude inventories ahead of the next day’s inventory report. Equity markets suffered major losses as investors grew increasingly concerned over the ongoing surge in Treasury yields, which had the potential to narrow corporate profit margins.

Natural gas edged 6.2 cents lower to $3.222 after the EIA reported a 90 Bcf build in storage, which was in line with market expectations. Crude plunged $2.20 lower to $70.97 after the EIA revealed a larger-than expected 6.0-Million-barrel increase in crude oil inventories. Stock losses deepened as investors remained focused on rising bond yields and slowing global growth.

FRIDAY 10/12
Natural gas revisited intra-day lows from the prior session and the prompt month contract ended the day 6.1 cents lower at $3.161. Crude managed to rebound 37 cents to $71.34 even after the International Energy Agency said global demand would grow at a slower pace than initially expected this year. Equity markets managed to claw back some ground from a massive two-day rout with support from a batch of better than-expected corporate earnings releases

The natural gas storage deficit will continue to be a major price driver as traders digest fresh production and demand signals.

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