Friday, June 26, 2020

Natural Gas Tumbles To 25-Year Low on Supply Glut

Tags

News shaping
the markets today

     

What’s happening: Natural gas crashed to its weakest level in around 25 years on Thursday, following data on inventories released by the US EIA (Energy Information Administration).

What happened: Natural gas prices have been under severe pressure lately due to soft demand amid the pandemic.

Although demand for natural gas, and hence its price, may be supported by various countries easing lockdown restrictions, investor sentiment was hurt by projections issued by the IEA (International Energy Agency).

Why it matters: There has been an oversupply of natural gas over the past few years with the US ramping up its oil drilling activities, which produces the liquified commodity as a byproduct. Some areas produce so much natural gas that companies burned it rather than take the trouble of selling it.

The US EIA on Thursday reported a higher-than-expected rise in the supplies of natural gas, with domestic supplies climbing 120 billion cubic feet in the week ended June 19. Analysts were expecting a rise of 107 billion cubic feet.

Following the latest report, total stockpiles of the commodity stand at 3.012 trillion cubic feet, which is 739 billion cubic feet higher than in the same period last year. Meanwhile, the IEA projected a 5% decline in global natural gas consumption in 2020.

Shares of companies producing gas also declined yesterday. EQT Corporation’s shares plummeted over 5%, while shares of Cabot Oil & Gas Corporation closed lower by more than 4%.

Natural gas futures tumbled around 8% in midday trading on Thursday to $1.47 per million British thermal units. The last time natural gas prices settled below the $1.50 level was in 1995.

Natural gas declined for the fourth straight session on Thursday, settling at $1.546 per million British thermal units.

What to watch: Investors will focus on any improvement in the economy to support the demand for natural gas. Traders will also keep an eye of the Baker Hughes weekly report on crude and total rigs count. Crude oil rigs in the US fell to 189 in the week ending June 19, down by 10 versus the prior week.

The Markets Today

     

French stocks will be in focus today, ahead of consumer confidence data scheduled for release later in the day.

Context: French CAC 40 closed higher yesterday, after recording its worst day in around two weeks on Wednesday when it declined by 2.6%. Investors brushed off concerns over a record surge in covid-19 cases in the US.

Details: French stocks opened on a downbeat note this morning on fears of a resurgence in coronavirus cases in some parts of the world. The stocks pared their losses as optimism grew with new infections in the country dropping below the 100 level for the first time since March 4.

The government of France announced plans to pare the terms of the Covid-19 work scheme, under which workers will receive 60% of their normal gross wages from October 1, compared to the current 70%.

Markets around the world attempted to digest the latest projections from the IMF, which now expects the global economy to contract by 4.9% in 2020, versus their earlier forecast of a 3% contraction.

Investors cheered the news of US regulators relaxing restrictions on large bank investments and the ECB announcing a Eurosystem repo facility for central banks.

The French CAC 40 index rose around 1% to 4,918.58 on Thursday. Meanwhile, the Dax 30 index gained 0.7% to reach 12,177.87.

What to watch: Investors await consumer confidence data from France, which dropped to 93 in May versus a reading of 95 in April.

Markets will also continue to focus on the coronavirus numbers, with France reporting around 197,885 infections and 29,755 deaths.

Other Markets: US indices trading closed higher on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.18%, 1.1% and 1.09%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Spain’s retail sales, Eurozone’s M3 money supply, UK’s car production, UAE’s loan growth, Italy’s business and consumer confidence as well as the US personal income, personal spending, University of Michigan's consumer sentiment and Baker-Hughes rig count.