Market Update: May 10, 2023

Natural gas prices appeared to have reset a floor this week even as strong supply and mild weather forecasts have dropped year to date gas prices by 50% and allowed this market to reverse the storage position that it had one year ago. Bullish traders wait to see if summer cooling demand and the upcoming hurricane season will change the current supply/demand picture of natural gas. Some of the market gains this week can partially be attributed to wildfires around Alberta, Canada which are creating some supply disruptions. These disruptions helped push the June contract through the 20-day moving average. Some technical analysts believe that the 20-day moving average represents an inflection point which traders should watch closely.

The latest storage report produced by the EIA stated an injection of 54 BCF which was inline with market expectations. The current inventory level now sits at 2.063 TCF, which is still nearly 20% higher than the 5-year average and almost 33% higher than one year ago.

Crude oil bounced back over the $73.00 mark this week after a healthy US jobs report came out on Friday. Prior to the bullish jobs report, the market had been pushed down near the $68.00 level as it focused on bearish Chinese data, banking troubles and a release of 2.9 million more barrels from the US Strategic Petroleum Reserve. The market is also focused on the announced OPEC plus cuts and whether countries such as Russia will comply.

The latest rig count produced by Baker Hughes stated a decline of seven to the total rig count bringing the new number to 748 rigs. Oil rigs dropped by three while gas rigs dropped by four. One year ago, the total rig count sat at 705 rigs.

This week’s additional graphic from the EIA shows the difference between OPEC and OPEC plus and illustrates each country’s 2022 contribution to the oil supply.