Natural Gas Slid Following Robust Inventory Report

Natural gas prices moved lower on Friday after whipsawing on Thursday following the EIA’s estimate of natural gas inventories. Softer than expected Canadian economic data weighed on prices.  The weather is expected to be mixed but warmer than normal weather in Texas could help prices remain buoyed.  Natural gas fell below support near a short-term upward sloping trend line that comes in near 2.91.  Resistance is seen near the June highs at 2.99.

The EIA reported that working gas in storage was 1,817 Bcf as of Friday, June 1, 2018. This represents a net increase of 92 Bcf from the previous week. Expectations were for an increase of 87 Bcf. Stocks were 799 Bcf less than last year at this time and 512 Bcf below the five-year average of 2,329 Bcf. At 1,817 Bcf, total working gas is within the five-year historical range.

Canada’s capacity utilization rate improved

Canada’s capacity utilization rate improved to 86.1% in Q1 from a revised 85.6% in Q4 (was 86.0%). The capacity use rate in Q1 of this year is the strongest since 86.4% in Q1 of 2006. Construction capacity marked the seventh straight quarterly improvement, climbing to 92.4% in Q1 from 90.8% in Q4 and driving the rise in the use rate for total capacity during Q1.

Canada employment fell 7.5k in May after a 1.1k dip in April. Full time jobs dropped 31.0k after a 28.8k gain. Part time rose 23.6k after contracting 30.0k. The unemployment rate was 5.8%, matching April to hold at a 40-year low. But the participation rate slipped to 65.3 in May from 65.4 in April. Hourly earnings of permanent employees grew at a 3.9 year over year pace from 3.3 year over year in April. The report is disappointing overall, but the jump in hourly earnings suggest that upward pressure on compensation costs remains in place despite the stumble in Canada’s job market during April and May.

Canada housing starts fell to a 195.6k pace in May, contrary to expectations for an improvement following a revised 216.8k in April. This is the first month below 200k since the 193.8k pace in May of 2017. Single detached starts improved 2.0% to a 70.7k pace in May from 68.3k in April. Multi-unit starts plunged 15.3% to 125.0k from 147.5k.