Natural gas daily recap: June 16

Mike Zaccardi, CFA, CMT

- Natural gas futures fell $0.055, -3.3%, to settle at $1.614 on Tuesday, a two-month low

- Cash cleared at the lowest price since December 3, 1998; Cal 21 and beyond were about unchanged. The price spread between the January 2021 and July 2020 contract is $1.30 – an all-time high indicating severe near-term bearishness and optimism/premium for 2021.

- On the chart, support is near $1.50 while $1.97 is resistance

- This morning, natural gas is called a penny lower to $1.605

Natural gas prices fell hard again on Tuesday. And again, oil rallied. Prices briefly fell into the $1.50s, an all-time low for the July 2020 contract, as near-term demand is just not strong enough. LNG exports were also weak once more while production is off the lows. Despite one of the hottest Junes on record in the cards, other supply/demand factors as well as technical price momentum rule the day. Higher oil prices, in the $35-$40 range is enough to keep producers pumping oil which means higher natural gas production. So the more optimism there is about an economic recovery, the more bearish the supply outlook is. Monday night’s run of the European Weeklies weather model also lost substantial cooling degree days looking out through July. The bulls appear to need a lava-hot summer to get a price rally going – that may be a big ask.

- Cash prices at Henry Hub cleared at $1.38/MMBtu (-$0.065) for Gas Day 17, a 20+ year low
- ICE weekly futures suggest a build of 84 on June 18 and 106 Bcf on June 25. Fall 2020 futures put storage at 3.98 Tcf on November 12 (5-year average: 3.68 Tcf, 2019: 3.73 Tcf).

Crude oil rose $1.26 to settle at $38.38 on Tuesday. Gasoline was higher by $0.0414 to close at $1.1657. Heating oil futures added $0.0356 to settle at $1.137. Oil prices rose sharply for a second straight session ahead of today’s EIA inventory report. Stronger retail sales and continued optimism that the Fed will provide an adequate backstop fueled a risk-on rally. In bearish news, Beijing said they will close schools due to another COVID-19 outbreak and the state of Florida reported a sharp rise in new cases. Meanwhile, the IEA expects 2021 to be a record rebound in demand after a huge drop in 2020. This morning, WTI is lower by 2% to $37.50 following last night’s API storage forecast suggesting a 3.9 million barrel per day build in oil stocks. Today’s EIA report calls for a 1 million barrel build.

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Chart used with permission from Tradingview.com