Natural gas futures continued to rally on Thursday despite a government report which showed a larger-than-expected build in storage stocks.
Vulnerable to Near-Term Correction, Higher Volatility – U.S. West Texas Intermediate and internationally-favored Brent crude oil futures recovered on Thursday to post a small gain after Wednesday’s steep sell-off. The markets were supported by supply cuts by major exporters, however, the inability to take out this week’s two-year highs suggested the markets were still vulnerable to near-term weakness. Traders attributed the rally to new buyers betting an OPEC-led coalition that is controlling current production cuts would agree to an extension of the strategy beyond the March 2018 expiration date when it meets on November 30 in Vienna, Austria.
New Forecast Calls for Average/Above Average Temps Up to November 23 – Natural gas futures continued to rally on Thursday despite a government report which showed a larger-than-expected build in storage stocks. The EIA report also showed stocks totaled 3.790 trillion cubic feet, about 2% below the five-year average. According to Platts, this week’s rally has been supported by below-average temperatures in several key demand areas. Demand in these areas hit 17.5 Bcf/d, about 4.3 Bcf/d above the previous seven-day average. Overall U.S. demand is expected to hit 88.65 Bcf/d Thursday, a level not seen since March 16, when demand topped 90 Bcf/d in the final weeks of the winter season.
Bulls Need Help from Weaker Stocks, Dollar, Interest Rates – Gold futures rose on Thursday as the weaker U.S. Dollar made the dollar-denominated asset a more attractive asset to foreign buyers. The precious metal was also supported by a sharp break in U.S. equity markets. Investors sold higher yield assets and moved the proceeds into the safe haven gold market. News that there were issues with the Republican tax reform plan drove down U.S. Treasury yields. This made the dollar a less attractive asset, driving up gold prices. According to CNBC, the Senate Republican’s bill to rewrite the tax code differed from their House counterparts’ plan. Like the House version, the Senate’s proposal would cut the corporate tax rate to 20 percent from 35 percent, but the Senate plan would delay implementation until 2019. The politicians suggest this process is normal, however, the market action suggests investors want clarity.
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