Morning Futures Briefing

Inventory Jump Sends Natural Gas Prices Lower

Natural gas futures traders couldn’t dismiss a larger-than-expected storage build last week as a mid-session rally faded by Thursday’s close.

The Energy Information Administration reported U.S. natural gas inventories increased by 89 billion cubic feet (Bcf) last week. This was above pre-report expectations of an 85 Bcf build and above the five-year average of 87 Bcf.

U.S. natural gas inventories now total 1.732 trillion cubic feet, 15.2% below the five-year average.

The Climate Prediction Center’s 8-to-14 day outlook calls for hotter conditions across the southern and eastern portions of the U.S., which could drive higher natural gas usage for power generation used for cooling.

U.S. natural gas production has been running near 95 Bcf per day, but that may increase towards 98 BCF per day by year -end as producers bring additional gas wells online to take advantage of attractive market prices.

However, if this ramp-up takes longer than anticipated, U.S. natural gas inventories could tighten even further as we head into winter.  

In overnight trade, July Natural Gas futures were trading lower (-3.29%).

In premarket trade, U.S. stock index futures were higher with the Dow Jones (+1.07%), S&P 500 (+1.22%), Nasdaq 100 (+1.69%), and the Russell 2000 (+1.48%) all in the green.

In Asia, the major indices were higher, with the Hang Seng (+2.96%), the Shanghai (+1.60%), and the Nikkei (+1.27%) all ahead.

European trade saw the markets move higher, led by the FTSE (+2.00%), the DAX (+1.89%), and the CAC (+1.22%) at midday.

Overnight Futures and Equities moves:

Copper futures closed higher (+2.36%) as COVID-19 lockdowns in Shanghai begin to ease. Copper also drew support from a decline in London Metal Exchange copper inventories.  

Soybean Oil futures closed lower (-1.49%), after Indonesia announced it will lift its ban on palm oil exports starting Monday. Soybean oil also saw continued pressure from the continued unwinding of long soybean oil/short soybean meal spreads.

Japanese Yen futures closed higher (+0.21%) as funds began to flow back into the yen after reaching 20-year lows against the U.S. dollar earlier this month. The yen also received support from better-than- expected data on machinery orders, which rose by 7.1% in March against an expected gain of 3.7%.

Lucid Group (LCID) shares closed higher (+11%) after the U.S. electric vehicle maker announced it will build its first overseas factory in Saudi Arabia.

Deere & Co. (DE) shares closed lower (-1.10%), reporting quarterly earnings this morning of $6.81 per share (EPS) and revenue of $13.37 billion. Average estimates were $6.71 EPS and revenue of $13.2 billion.  

Foot Locker (FL) shares closed modestly lower (-2.01%) as the company reported $1.60 EPS on revenue of $2.17 billion. Average estimates were $1.55 EPS and revenue of $2.2 billion.  

It’s a quiet end of the week for economic data with the Baker Hughes Rig Count report out this afternoon.       

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