ENERGY PRICES WERE MIXED ON TUESDAY… natural gas futures in New York rallied… inexplicably… while the liquids finished, more-or-less, around unchanged in front of today’s DOE reports. Speaking of which, the crowd is expecting a net build of 2.75 MMbbls in the major products and a 2.0 MMbbl draw in crude oil.
Having closed below this threshold in the last three sessions we no longer have to ask this question. On the other hand, while we are now consistently trading below $60, all we are really doing is consolidating inside the 50/62% retracements (ratio scale) from 61.25 to 58.59. We like the market lower.
Thus, we think a break below 58.59 sets the table for a flush towards $50… where we think prices belong. However, even though here at The Schork Report we are bearish we have to recognize and appreciate that a rebound back through 61.25 likely signals another attempt for a run at $75.
For tomorrow’s EIA report the market is looking for an 80 Bcf injection. This report marks the start of the second (of three) phase or bucket of the refill season. As such, beginning tomorrow injections will begin trending lower.
In this vein, the typical injection is 76 Bcf. Last year the EIA reported a large 104 Bcf injection for the related week (11-Jul-08). Outside of the Gulf Coast market areas, nationwide implied weather demand last week was below normal and below the 2008 analogue (see below). Therefore, when combined with residual slack demand from the 04th of July holiday, we could be in store for a true-up to last week’s (75 Bcf) report.
So why did NYMEX Henry Hub gas rally yesterday?
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.