Weekly Energy Market Watch | February 18, 2019

Jonathan Lee, Senior Energy Market Intelligence Manager at ENGIE Insight

MARKET COMMENTARY | For Week Ending 2/15
Natural gas marginally higher as traders consider the heating demand outlook.

Natural gas climbed 5.9 cents higher to $2.642 per MMBtu as weekend weather forecasts turned more supportive for increased heating demand in the major consuming East. Crude oil edged 31 cents lower to $52.41 per barrel due to a stronger dollar and ongoing trade deal concerns between the U.S. and China. Equity markets traded in a mixed fashion as investors closely monitored the trade negotiations that kicked off in Beijing.

The Mar-2019 NYMEX natural gas contract settled another 4.6 cents higher at $2.688 as below-normal temperatures were expected to stretch across much of the nation into late-February, providing a lift to heating demand. Equities soared on reports U.S. lawmakers reached a tentative border-security deal to prevent a looming government shutdown. Crude gained 69 cents to $53.10 with support coming from a weaker dollar, rallying equity markets, and an 800,000 barrel a day drop in OPEC oil output during the month of January.

Natural gas gave back early-week gains as traders positioned ahead of Thursday’s storage report, which was expected to show a draw in the mid-80s. The cost of gas fell 11.3 cents to $2.575. The Mar-2019 WTI crude oil contract closed 80 cents higher at $53.90 despite a 3.6-Million-barrel increase in domestic oil inventories after Saudi Arabia’s energy minister said they would make further cuts to production. Stocks landed in the green after President Trump signaled some flexibility on the timeline for a trade deal with China if the two sides were close to an agreement.

Natural gas dipped 0.2 cents to $2.573 after the EIA reported a smaller-than-expected 78 Bcf draw from storage, which narrowed the deficit compared to the 5-year average to 333 Bcf. Crude climbed 51 cents to $54.41 after the IEA reported global supply fell 1.4 Million barrels a day to 99.7 Mb a day in January. Equities lost ground after the Commerce Department reported December retail sales slid 1.2%.

Natural gas advanced 5.2 cents to $2.625 after Thursday’s muted response to the storage report as traders began to shift their attention to the following week’s report, which was expected to widen the deficit. Crude oil jumped $1.18 to $55.59 as traders continued to focus on potential trade progress and signs OPEC was following through on its latest pledge to cut production. Stocks pushed higher to end the week on reports of continued progress in the trade negotiations with China.

Natural gas prices will likely struggle to gain traction unless cold temperatures spur increased heating demand during the remaining winter months.

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  • André D. Henderson, Sr.

    Do we expect fluctuations between $4 and $5?

    And what needs to occur for gas to fall below $4?

    • Jonathan Lee, Senior Energy Market Intelligence Manager at ENGIE Insight

      Thanks for your question Andre. It will likely operate between this range throughout much of winter with the potential for short-lived jumps above $5 depending on the severity and length of cold shots. For natural gas to fall below $4 and into the mid-$3 range, it’ll take a prolonged moderation in temperatures, continued near-record production, and a solid narrowing of the storage deficit.

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