Market Update: August 2, 2023

Natural gas prices continue to trade within a narrow band, which occurred for much of July. Some market watchers have described this market as “listless” as traders have been unable to push this market in either direction due to strong production, healthy storage, and relatively soft manufacturing demand. One index monitoring manufacturing is the ISM report (formerly Purchasing Managers’ Index -PMI), which measures demand from over 400 companies across 20 industries. Tuesday morning the latest ISM figures came out at 49.0 indicating that the economy is still in a state of contraction. For reference a score of 50 indicates a balanced economy, while anything over 50 represents a growing economy. The ISM index takes new orders, inventory, production, commodities, and employment into consideration.

The latest storage number reported by the EIA stated a smaller than expected build of 16 BCF, which brings current inventory levels to 2.987 TCF. At that level, inventory is now 23.7 percent higher than last year and 13.1 percent higher than the 5-year average.

Crude oil traded up near the $82.00 level this week on a falling rig count, lower supply, and growing international demand. Some analysts fear that the spike in crude oil could bring higher inflation back as gasoline prices rise.

According to Baker Hughes the total rig count fell by five in their latest report. Gas rigs dropped by three while oil rigs fell by one. The total rig count currently sits at 664 rigs, which is 103 less than one year ago.

This week’s additional graphic from S&P Global illustrates the US Manufacturing PMI, which was discussed earlier in this brief. According to Chris Williamson, Chief Business Economist at S&P Global, the chart shows that manufacturers appear to be shrugging off recession fears and planning for better times ahead as the index tries to get back into growth territory.