Happy Friday
Pretty quiet day, with the October NYMEX front month trading up only 3 cents to $2.287 US/mm without jumping around much (the low to high was $2.232 to $2.293).
This is the highest close since July 12, 2024 for two days in a row, and is teetering along the roof of the range that prices have bounced between for the past few weeks. Don’t be so quick to assume that prices will take off and break out from the pattern though, since they may come right back down in the coming days, especially since cooling demand is decreasing (U.S. Power Plants are consuming 42.9 bcf this week, down from 46.6 last week, and is expected to drop to 39.8 next week). We will get a better sense of the markets’ direction next week.
I have been talking about how demand would fall off when the seasons changed. Simply speaking, the NOAA forecasts are red when the temperatures are above average and blue/grey when they are below average. But consider how the average’s will change. Look at the chart below from the Weather Network: average temperatures in Toronto are high in July and August, but then start marching down in September. September starts on average around 25C but ends the month around 15C.
What I’m trying to say is that 20C was below average on August 31st but will be above average on October 1st because the average is falling. Now think about cooling demand: we are going to need a lot less air conditioning at the end of the month, so there will be more natural gas available to shove into storage. Now is the time that Utilities will buy up natural gas to fill storage for their projected requirements for the winter before the falling average temperatures become heating demand.
In economic news, the August employment numbers came out today both for the US and for Canada.
Statistics Canada reported the unemployment rate rose .2 percentage points to 6.6%, the highest since 2017 (excluding the pandemic). The Bank of Canada has already cut rates three times since June.
In the US, the Labor Department reported the unemployment rate at 4.2%, inline with expectations. However, in August, there were only 142k news jobs versus the 161k expected, a clear miss. The stock markets sold off as a result. The NASDAQ 100 was down 2.5%.
Clearly this is pressure on the Federal Reserve to begin cutting rates. Some people think that the stock markets will rally if/when these rate cuts begin, but I wonder if the market will ask ‘Just how bad is this economy?’ and sell off even more. Stay tuned… [WFG]