GO
Loading...

Schork Oil Outlook: Natural Gas Is A Market Pig!

Stephen Schork, Editor, The Schork Report
Wednesday, 27 May 2009 | 11:21 AM ET

Goodness gracious me, natural gas is a pig… or as Babs from Animal House might say, that market is a P-I-G, PIG!

Yesterday the second-month out July contract eked out a 2.2 cent gain. That is rather pitiful given that residual fuel oil, per the NYMEX 1% NYH swap, was marked 20 cents higher. Despite yesterday’s higher close, July Henry Hub futures have closed lower in 7 out of the last 11 sessions. More importantly, yesterday the contract posted a lower higher and lower low for an eighth straight session.

That, ladies and gentlemen, is a text book definition of a bear market.

Dueling Economic Headlines:

“We see no evidence that a recovery in home prices has begun.”

David M. Blitzer, Chairman
S&P Index Committee

“… as far as consumers are concerned, the worst is now behind us.”

Lynn Franco, Director
The Conference Board Consumer Research Center

According to S&P’s Mr. Blitzer, “Declines in residential real estate continued at a steady pace into March… All 20 metro areas are still showing negative annual rates of change in average home prices with nine of the metro areas having record annual declines. Seventeen metro areas recorded a monthly decline in March, with Minneapolis, Detroit and New York posting record monthly declines.”

On the other hand…

According to the Conference Board’s Franco, “Continued gains in the Present Situation Index indicate that current conditions have moderately improved, and growth in the second quarter is likely to be less negative than in the first.” [emphasis ours]

Got that? Less bad is good.

And the winner is…

The Conference Board…by a knockout. Supporting graphs and analysis are included in today’s issue of The Schork Report.

The S&P was trading down around 882 in the half-hour following the 9:00 a.m. release of the home price index. The market shot up to 900 in the minutes following the 10:00 a.m. release of the consumer confidence report and finished the session at 910.33.

Of course, crude oil followed the stocks like the obedient puppy that it is. The WTI contract for July delivery was trading below $60 when the S&P was bottoming, climbed to 60.40 by 9:59 a.m. and then surged to 61.54 by 10:15. Thus, after trading more than $2 below Friday’s close in the first 30 minutes of the open-outcry session, the contract finished up at 62.45 to close the day.

_________________________
Stephen Schork is the Editor of, "The Schork Report"and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.

Featured