Market Summary, Abbreviated

July 5, 2019July 10th, 2019
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Market Summary is not published this short holiday week, but please find a recap of this week’s fundamental and price updates below. Last Look will be coming your way, after close, with a wrap-up of how oil and gas settled for the week.

Oil gave up some ground this week, trading around $57 for the August contract, while it had been slightly higher to close the week last week, at $58.50.

While OPEC+ has reiterated its goals to keep supply low for the next nine months (at least), crude prices have been dogged by concerns of global economic health. Numerous economic indicators, both trailing and leading, show that economic output is much slower than in the last few years.

When WTI briefly rose over $60/Bbl, we considered reversing our bullish outlook. But, price stayed there for a very short time. At these levels, we find reasons to justify another rally, but it would take a supply-side catalyst or easing concerns about the global economy. Further, WTI in the high-$50s is a price where the market often retreats. The 12-month average is around $60.50.


Crude stocks eased by 1.09 MMBbl to 468.5 MMBbl. This withdrawal was slightly below the 2.79 MMBbl that analysts were expecting. It also comes on the back of last week’s massive 12.8 MMBbl draw. The unexceptional drop in inventories prompted a slight decrease in WTI prices, however the market quickly brushed off any perceived storage concerns.

Stocks at Cushing rose last week by approximately 0.6 MMBbl to 52.4 MMBbl. This continues the general trend of builds that Cushing has been experiencing this year as storage is noticeably above the five-year average currently.

US exports fell from the record that they set in the previous week. Imports increased from approximately 6.7 MMBbl/d to almost 7.6 MMBbl/d. Exports were less than 3 MMBbl/d after setting a new record last week at 3.8 MMBbl/d.

Gas showed signs of life late in the week.

We have maintained that gas prices have persisted low this spring and summer because of (1) oversupply that was apparent this winter, and (2) uncooperative weather that has held back demand. The middle of July may bring our first shot of above-normal temperatures for the eastern half of the US. On Friday, the new round of forecasts spurred a morning rally of over a dime, rising above $2.40. Traders clearly had their fingers on the buy button, ready for a reason to bid. We see this as some confirmation that bullish underlying fundamentals would persuade the gas market to move higher if weather doesn’t disappoint.

Natural Gas storage reported a build of 89 Bcf, bringing total storage numbers to approximately 2.4 Tcf with a year over year change of 12%. The build was noticeably larger than the 79 Bcf build analysts were expecting. Inventories for the US are now at a surplus of 249 Bcf compared to last year, but at a 152 Bcf deficit compared to the five-year average.

The next two weeks of injection estimates are predicted to continue to trend lower to 68 Bcf and 63 Bcf respectively.

Weather forecasts for the month of July still look promising as east and west coast markets, as well as Texas, are projected to be warmer than normal. The trend back to typical summer weather should provide a boon to natural gas prices as power burn increases to meet newfound demand.

This spring and summer has been marked by above-average injections. However, last week there was a clear breakaway from the triple digit builds that have been plaguing the market over the last two months.

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