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Jobless Claims Fall, Stock Rises

The new prompt-month July ’20 NYMEX natural gas contract is trading at $1.84 while the July crude oil contract is trading at $32.60. The EIA reported an additional 109 Bcf to natural gas storage inventories in the weekly storage report for the week ending May 22nd. This is just below last year’s 110 Bcf and above the five-year average of 93 Bcf. During the third full week of May, overall energy use in NYC averaged between 14-15% below typical demand levels according to NYISO. The electricity system still must be prepared to meet peak load conditions even if average demand is typically far less. As summer temperatures rise and cooling demand follows, expect seasonal injections to peak in the coming week or two followed by a steady decline as the heat increases through July and August.

U.S. workers filed 2.1 million jobless claims last week, extending the downward trend while remaining much higher than before COVID-19. S&P 500 futures jump on optimism about economies reopening and the potential development of a COVID-19 vaccine. On Tuesday, the Dow rose about 600 points on signs of economic activity resuming faster than some had expected in the U.S. and elsewhere in the world. The hopefulness of investors drove stock higher.

Natural gas pricing plays a key role in electricity power pricing due to the increasing reliance on natural gas fired generators as nuclear, coal, and oil generation is retired and mothballed. As the marginal unit of generation, gas prices are directly correlated to power pricing (more so in some regions such as NYC vs. others such as parts of PJM). We keep an eye on natural gas market fundamentals in order to provide insights into forward power pricing for our clients. Gas production has grown and surpassed any speculation that production would not be able to keep up with demand due to LNG and Mexican exports.

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