Weekly Energy Market Watch | May 20, 2019

Jonathan Lee, Senior Energy Market Intelligence Manager at ENGIE Insight

MARKET COMMENTARY | For Week Ending 5/17
Natural gas inches higher as above normal temperatures come into view.

The Jun-2019 NYMEX natural gas contract inched 0.2 cents higher to $2.621 per MMBtu with production holding steady and temperatures expected to warm in the East. Equity markets suffered major losses after China announced $60 billion in new tariffs on U.S. goods in retaliation to the duty-hike made the prior week. Crude oil gave up earlier gains sparked by an attack on two Saudi tankers as falling equity markets dragged other riskier asset classes lower. Oil prices closed 62 cents lower at $61.04 per barrel.

Natural gas pushed 3.8 cents higher to $2.659 as a blast of unseasonably cool temperatures in the Northeast added to the demand outlook. Crude oil rebounded 74 cents to $61.78 after Saudi Arabia halted flows on a major pipeline following an attack by armed drones, the second attack on its operations in as many days. Equities recovered some of Monday’s steep losses after President Trump said he would like to get a trade agreement in place during the next 4 weeks.

Natural gas lost 5.8 cents to settle at $2.601 as traders positioned ahead of Thursday’s storage report, which was expected to once again show a build above the 5-year average and trim the deficit. Crude gained 24 cents to $62.02 even after the EIA reported a 5.4-Million-barrel increase in domestic oil inventories, pushing levels to 9.2% above last year. Stocks landed in positive territory on reports the Trump administration planned to delay tariffs on car and auto parts for up to 6 months.

Natural gas rebounded 3.8 cents to close at $2.639 after the EIA reported a slightly higher-than-expected 106 Bcf build in storage, which narrowed the deficit to the 5-year average to 286 Bcf. The cost of crude climbed 85 cents higher to $62.87 as escalating tensions between the U.S. and Iran had the potential to disrupt oil flows in the region. Wall Street continued to push stocks higher while investors maintained their focus on U.S.-China trade relations.

Natural gas dipped 0.8 cents to end the week at $2.631 as the fuel continued to trade in a narrow range. Crude oil settled 11 cents lower at $62.76 as OPEC considered easing production cuts amid escalating Middle East tensions. Equity markets finished the session on a down note as investors were reluctant to push stocks higher with uncertainty surrounding trade negotiations.

Natural gas will likely remain locked in a narrow trading pattern as strong production and mild temperatures chip away at the 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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