Weekly Energy Market Watch | June 17, 2019

Jonathan Lee, Senior Energy Market Intelligence Manager at ENGIE Insight

MARKET COMMENTARY | For Week Ending 6/14
Natural gas range-bound as traders weigh supply and demand.

Natural gas gained 2.0 cents to settle at $2.357 per MMBtu as production experienced a modest decline over the weekend. Crude oil retreated 73 cents to $53.26 per barrel as traders questioned the demand outlook amid ongoing trade negotiations between the U.S. and its partners. Equity markets continued to push higher as tariff concerns with Mexico receded after President Trump said he reached a deal with Mexico over illegal immigration.

The July-2019 NYMEX natural gas contract climbed another 4.2 cents to $2.399 as traders covered short positions and continued to evaluate the supply and demand balance. Crude oil inched a penny higher to $53.27 ahead of the following day’s inventory report as traders were reluctant to place bets with domestic supplies at 2-year highs. Equities failed to extend their 6-day rally after China’s foreign minister said they would respond firmly to any additional tariffs placed on Chinese goods.

Natural gas gave back 1.3 cents to close at $2.386 ahead of Thursday’s storage report, which was expected to once again come in higher than the 5-year average and shrink the deficit. The July-2019 WTI crude oil contract fell $2.13 to $51.14 after the EIA reported a 2.2-Million-barrel increase in domestic oil inventories, which pushed supplies to 12.3% above last year at this time. Stocks were modestly lower as investors digested the day’s steady inflation report and kept an eye on U.S.-China trade developments.

The price of natural gas moved toward lower support levels after the EIA reported a 102 Bcf injection into storage, the fifth consecutive triple-digit build. By day’s end, the front month contract closed 6.1 cents lower at $2.325. Oil jumped $1.14 to $52.28 after two oil tankers were severely damaged in attacks in the Strait of Hormuz, where a third of world’s seaborne oil is shipped. Equity markets rebounded following a modest two-day skid with higher energy stocks leading the way.

Natural gas recovered the prior session’s likely exaggerated losses given the smaller-than-expected storage build as traders covered short positions ahead of the weekend. The cost of gas settled 6.2 cents higher at $2.387. Crude oil edged 23 cents higher to $52.51 after the prior day’s oil tanker attacks as the U.S. Navy said video evidence pointed to Iranian involvement. Equities landed in negative territory with pressure from disappointing Chinese economic data.

The current bearish sentiment in the natural gas market will likely continue to weigh on prices until summer heat arrives.

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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?

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