FXEMPIRE
All
Ad
Corona Virus
Stay Safe, FollowGuidance
World
99,782,634Confirmed
2,139,214Deaths
71,777,753Recovered
Fetching Location Data…
Advertisement
Advertisement
James Hyerczyk
Natural Gas

Natural gas futures closed sharply lower last week. Losses could have been worse if not for a short-covering rally on Friday. The catalysts behind the selling pressure are rising U.S. storage inventories and U.S. export concerns. Both are the result of a plunge in demand due to the COVID-19 pandemic.

A steep drop in the number of operating natural gas and crude oil rigs seems to have had little impact on supply. Additionally, those waiting for the hot weather to return have been mostly disappointed.

Advertisement
Know where Natural Gas is headed? Take advantage now with 

75% of retail CFD investors lose money

Last week, July natural gas settled at $1.849, down $0.032 or -1.70%.

US Energy Information Administration Weekly Storage Report

The EIA said working gas in storage rose by a net 109 billion cubic feet (Bcf) in the week-ended May 22. Traders had forecast a build of 113 Bcf.

The 109 Bcf injection “does confirm balance tightening, but not enough to suggest that we are significantly lowering the risk of completely filling storage this fall,” Bespoke Weather Services said.

NatGasWeather analyst Andrea Paltrinieri characterized the EIA figure as “a no good number.” Participating on The Desk’s online energy chat platform Enelyst, Paltrinieri said he would have preferred to see an injection in the high 90s Bcf range in order to confirm better tightening of the supply/demand balance.

“I was at 110 Bcf, not so good to avoid 4 Tcf right now in my model,” the analyst said.

Total working gas in storage as of May 22 stood at 2,612 Bcf, 778 Bcf higher than last year and 423 Bcf above the five-year average, EIA said.

Broken down by region, the East injected 35 Bcf into storage, and the Midwest added 30 Bcf, according to EIA. South Central inventories rose by 24 Bcf, including a 20 Bcf build in nonsalts facilities and 3 Bcf build in salts. The Pacific added 11 Bcf into stocks, while the Mountain range injected 8 Bcf.

Advertisement

New Concern:  Falling Production

Genscape reported that U.S. production declined slightly last week from near two-week highs that on last Tuesday reached 86.6 Bcf/d. Production last Thursday was 85.7 Bcf/d, which is about 6.6 Bcf/d less than last month’s average, according to the firm, and the result of production shut-ins around the country.

“While production has rebounded slightly off of May 20 lows of 84.9 Bcf/d, Wednesday’s and Thursday’s values suggest a slight reversal to the downside,” Genscape analyst Preston Fussee-Durham said.

Short-Term Weather Outlook

Bespoke sees summer weather to become increasingly important as the move to a La Nina base state favors a hot summer, which may add some strength to power burns, Natural Gas Intelligence reported.

At some point in the next two-to-three weeks, the firm expects prices to make another run toward $2.00, but it pointed out that selling pressure could continue in the near-term before getting a push higher.

“This would keep the general prompt-month trading range alive and well,” Bespoke added.

US Crude Oil, Natural Gas Rig Count Slips

Baker Hughes on Friday reported that the number of active U.S. rigs drilling for oil declined by 15 to 222 this week. The oil-rig count has now fallen for 11 weeks in a row, suggesting further declines in domestic crude output. The total active U.S. rig count, meanwhile, also fell by 17 to 301, according to Baker Hughes.

The U.S. natural gas rig count dropped two units to finish at 77 for the week-ending Friday, May 29.

Weekly Forecast

Continuing warming in the latest weather models helped snap the losing streak late in the week, which is what traders will try to build on early this week. In my opinion, weather is going to move to the forefront this week.

Natural Gas Intelligence reported that of early Friday, the weather data had taken “another step in the hotter direction” over the past 24 hours, showing changes in the eastern half of the Lower 48 between days six and 15 of the outlook period, according to Bespoke Weather Services.

“With projected global angular momentum anomalies heading negative over the next two weeks, signifying the atmosphere’s move toward a La Nina base state, confidence is increasing” in overall hotter trends for the summer, Bespoke said. “While not an extreme pattern at the moment, other than in parts of the central U.S. where stronger anomalies are most persistent, there is just a lack of cooling anywhere once beyond the start of next week. This keeps projected demand above even the hotter 10-year normal.”

For a look at all of today’s economic events, check out our economic calendar.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker

  • Your capital is at risk
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US