? Time will tell. Yesterday early morning bullish thrust stalled in between our 58.03 inflection-point/58.89 intraday. That drive petered out as traders looked back towards equities and realized that they may have jumped the gun. The market plunged in the early afternoon, but momentum stalled exactly on Wednesday’s 55.46 pivot. Thus,
if you are bullish WTI, you are still feeling pretty good about your view.NYMEX Henry Hub cross-seasonal spreads have stopped falling, although, the negative trend is holding. For example, both the Oct/Nov and winter/ summer contangoes are well defined. On the other hand, WTI’s recent strength notwithstanding, the contract, relative to the rest of complex, is coming back to earth. For instance, two weeks ago the July WTI contract finished at 149 cents on the dollar to the Henry Hub. As we noted in the report for that session ) crude oil was extremely overbought compared with natural gas and we thought a regression to the mean (?76 cents) was due.
Indeed, since then July WTI has risen by 13 percent, but natural gas has jumped by 19 percent. As such, WTI settled last night down at 138 cents on the dollar. Furthermore, as we illustrate , this cross-commodity play recently broke through support at a nearby trendline and is now threatening longer dated support. In other words, crude oil is still dear relative to natural gas. Thus, despite the fundamentals, we would rather own gas against oil at this point.
As we look ahead to next Thursday’s EIA report, the typical natural gas injection is 84 Bcf. Last year the EIA reported a 93 Bcf injection for the corresponding week (09-May-08). Nationwide implied weather demand this week was weak, i.e. key markets in the Great Lakes and East experienced typical shoulder-month-esque patterns.
As such, we could be in store for the first triple-digit injection of the season.
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Stephen Schork is the Editor of, and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.