Mike Zaccardi, CFA, CMT

- Natural gas futures rose $0.022, +1.2%, to settle at $1.849 on Friday, the highest since May 7 having made fresh all-time lows on the June 2020 contract earlier in the day

- Cash was down sharply

- On the chart, support is near $1.60 while $1.97 is resistance

Natural gas prices were higher early in the session on Friday, near $1.87, before morning selling pressure took the July contract to all-time lows. Not all-time lows for the continuous prompt-month, of course. Buyers, maybe just shorts covering before the weekend, lifted prices into the afternoon close. It was another quiet week price-wise as the June expiration was met with little fanfare. Fundamentally, however, there is of course a lot going on. Production is flat year-over-year while demand is also lower. Power burns are increasing as heat encompasses much of the nation. It was just a few weeks ago when we were talking about late-season heating demand and snowstorms for the Great Lakes & Northeast. Elsewhere on the demand front, LNG exports are about flat from this time last year as well. Cargo cancellations are mounting for the summer, though the market currently expects an LNG export recovery toward the end of the year – time will tell. Market analysts are still weighing all of these dynamic factors when coming up with their end of storage season targets – the market generally expects inventories from 3.8-4.1 Tcf come early November – higher than usual. At the same time, storage for end of withdrawal season next spring are more bullish.

- Cash prices at Henry Hub cleared at $1.595/MMBtu (-$0.095) for Gas Day 1
- ICE weekly futures suggest a build of 113 on June 4 and 105 Bcf on June 11. Fall 2020 futures put storage at 3.9 Tcf on November 12 (5-year average: 3.68 Tcf, 2019: 3.73 Tcf).

Crude oil rose $1.78 to settle at $35.49 on Friday, a 12-week high and a 5 straight weekly advance. Gasoline was higher by $0.0525 to close at $1.0785. Heating oil futures added $0.0615 to settle at $1.0366. Oil prices continued to trade within the $30-$35 range last week – until the last few minutes of trading on Friday. That $5 range had persisted since May 18. A bearish storage report last Thursday morning did not have a major impact. Tensions with China have been emerging once again; a re-hatch of 2019. COVID-19 impacts seem to be subsiding as normalization ensues. Friday’s weekly Baker Hughes rig count report revealed yet another drop in oil rigs and a loss of 2 natural gas rigs, but there was not much market reaction. Oil prices finished May with the best percentage performance ever as demand hopes persisted throughout the month.

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Chart used with permission from Tradingview.com