Weekly Energy Market Watch | April 15, 2019

Jonathan Lee, Senior Energy Market Intelligence Manager at ENGIE Insight

MARKET COMMENTARY | For Week Ending 4/12
Natural gas mixed on the week with fundamentals largely unchanged.

Natural gas gained 4.4 cents to settle at $2.708 MMBtu as traders covered short positions amid forecasts for widespread cooler-than-normal April temperatures. Crude oil marched to a fresh 5-month high as oil output from Libya had the potential to decline with the country teetering on the verge of a full-scale civil war. The May-2019 WTI contract closed $1.32 higher at $64.40. Equity markets traded in a mixed fashion as investors awaited the release of quarterly corporate results.

Natural gas edged 0.9 cents lower to $2.699 as traders weighed a likely uptick in demand due to a major snowstorm moving across the Midwest against an expected narrowing of the storage deficit. Oil prices slipped 42 cents to $63.98 as traders locked in profits ahead of the following day’s inventory report, which was expected to show a 2.0 Mb increase in oil inventories. Equities retreated on renewed concerns over U.S.-EU trade relations after President Trump signaled $11 billion in new tariffs could be issued against EU goods.

The May-2019 NYMEX natural gas contract inched 0.1 cents higher to $2.700 ahead of Thursday’s storage report, which was expected to show a build in the mid-20’s. Crude oil advanced 63 cents to $64.61 after the EIA reported a 7.0 Mb increase in oil inventories, but a 7.7 Mb decline gasoline stocks, and a 0.1 Mb dip in distillates. Stocks were largely unchanged as investors sifted through the Fed’s minutes from their previous monetary policy meeting.

Natural gas fell 3.6 cents to $2.664 after the EIA reported a 25 Bcf addition to storage, which narrowed the deficit to the 5-year average to 485 Bcf. Crude oil shed $1.03 to finish the session at $63.58 after the IEA reported demand within the OECD group fell by 300,000 barrels a day in the fourth quarter, the first decline since 2014. Equity markets were mixed on the day with investors treading carefully ahead of the release of first quarter corporate earnings from major financial companies.

Natural gas continued to trade in a narrow range and inched toward the prior week’s lows as the fundamentals gave the market little incentive to make larger price swings. By day’s end, front-month gas closed 0.4 cents lower at $2.660. Stocks soared higher following a batch of strong bank earnings. Oil tracked higher with equity markets on hopes a solid earnings season would lead to stronger demand down the road and prices settled 31 cents higher at $63.89.

Natural gas experiencing limited volatility, but trending to the downside as more moderate temperatures this spring could fuel larger storage injections.

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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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