Weekly Energy Market Watch | March 18, 2019

Jonathan Lee, Senior Energy Market Intelligence Manager at ENGIE Insight

MARKET COMMENTARY | For Week Ending 3/15
Natural gas loses ground with heating demand set to decline.

Natural gas fell 9.3 cents to $2.772 per MMBtu as traders weighed a forecasted warm-up in the East and the loss of demand against an expected sizable storage draw reported Thursday. Crude oil climbed 72 cents higher to $56.79 per barrel after Saudi Energy Minister Khalid al-Falih said OPEC could maintain its current round of cuts beyond the planned 6-month period. Equity markets snapped their 5-day losing streak after the Commerce Department reported slightly better-than- expected retail sales for January.

The Apr-2019 NYMEX natural gas contract rebounded 1.2 cents to $2.784 as a major blizzard was set to sweep across the Central U.S., providing an uplift in late-season heating demand. Crude prices inched 8 cents higher to $56.87 on easing global oversupply concerns following reports Venezuelan output fell to under 1.3 Million barrels a day from over 2.0 Mb a day in 2017. Equities traded in a mixed fashion after consumer inflation data showed softness in monthly home price growth.

Natural gas edged 3.6 cents higher to $2.820 ahead of the following day’s storage report, which was expected to show a withdrawal around 200 Bcf and would widened the deficit by about 100 Bcf. The Apr-2019 WTI crude oil contract jumped $1.39 to $58.26 after the EIA documented a 3.9-Million-barrel decline in oil inventories. Stocks traded in positive territory on signs of stability in the manufacturing sector and muted wholesale inflation.

Natural gas gained 3.5 cents to close at $2.855 after the EIA reported a 204 Bcf draw from storage, which put working gas in storage at 1,186 Bcf and stretched the deficit to the 5-year average to 569 Bcf. Oil prices settled 35 cents higher at $58.61 even after OPEC reported it slowed its planned cuts in oil output last month, trimming just 221,000 barrels a day to average 30.5 Mb per day. Equity markets held steady even with concerns over slowing industrial output from China and news of stalled trade talks.

The cost of natural gas lost 6.0 cents to close at $2.795 as updated weather forecasts called for moderate temperatures to move into the major consuming regions in the Northeast and Midwest, which would limit remaining storage withdrawals. Crude dipped 9 cents lower to $58.52 as traders continued to consider OPEC’s February oil output, which was at the slowest pace in 4 years. Stocks pushed higher after Chinese Premier Li Keqiang said he believed a deal could be reached that suited both sides.

Natural gas trading in a narrow range as traders weigh warming temperature trends and lower heating demand against a widening storage deficit.

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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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