Natural gas daily recap: April 27

Mike Zaccardi, CFA, CMT

Natural gas prices had an eventful session today, at least price-wise. Options expired on Monday, and much like expiration day in crude oil last Tuesday, natural gas saw high volatility. 

The range from the morning to the afternoon was about 24 cents, nearly 15%. Waves of selling pressure took the May contract below $1.60 for a brief time before massive buying came, perhaps some short-covering ahead of this afternoon’s expiration. 

The prompt-month traded into the mid $1.80s after the settle. What happened fundamentally during the day to bring about that rally? Not much. Sometimes there isn’t a fundamental news-item to cause price moves, baffling many analysts. Further out on the curve, June ranged 16 cents while July swung 13 cents. January 2021 natural gas continued its uptrend, settling comfortably above the $3.00 figure. 

A dearth of demand in the next week will keep the attention on developments with COVID-19. Natural gas production is falling, LNG demand is down, and oil companies are in a profitability crisis; all impacted by COVID-19.

Crude oil fell $4.16 to settle at $12.78 on Monday. Gasoline was lower by $0.0129 to close at $0.6483. Heating oil futures lost $0.0363 to settle at $0.6104. Oil prices cratered today as storage nearing capacity at Cushing, OK sent the market sharply lower. 

Funny enough, a 25% move in oil doesn’t feel abnormal in light of last week’s negative $40 print and moves on the order of $30, $40, $50 over the course of a single session. 

Another huge build in oil stocks is expected to be reported tomorrow, and the API will give their weekly change this afternoon. Ironically once again, the oil & gas exploration & production ETF (XOP) rallied sharply today – the fund rose 20% last week amid turmoil in WTI.