Natural gas daily recap: April 28

Mike Zaccardi, CFA, CMT

Natural gas prices finished higher today after Monday’s huge intraday surge. The expiring May contract saw very light trading action, but peaked at $1.92 during the morning. Midday selling pressure as traders finalized positions brought the prompt month to near $1.80 by the afternoon settle. The much more heavily-traded June contract crossed the $2.00 level early on, then drifted lower though still finished ahead.

Looking macro, more states are looking to re-open for business, and it will be interesting to see the demand changes. It is likely the expiration of lockdowns will only mean a gradual return to normalcy. That means industrial and commercial demand will probably still be weak and residential loads may ease. Just about all schools will remain closed for the next several weeks, which implies working from home probably isn’t going anywhere in earnest soon.

I would be remiss not to touch on the weather picture as well – a persistent cold pattern looks to hang around the Great Lakes and Northeast, so some late-season heating demand will continue through at least mid-May while the West will be warm to downright hot in the desert Southwest.

In other natural gas fundamentals, production has dropped to near YTD lows while LNG demand has also been weak.

So a lot is going on in the natural gas space to say the least. All of this during what is normally boring old shoulder season.

Oil prices ended Tuesday not far from unchanged. There is tremendous fear of holding long the front-month contract of WTI after last week’s trading action insanity. The June contract trades at a heavy discounted to delivery months later this year. Storage at Cushing, OK is surging with little available capacity. Oil tanker stocks have been surging as the cost to store offshore has increased sharply.

The EIA will report the latest weekly storage build later this morning – consensus calls for another 11 million barrel per day build.
chart via