The natural gas market kind of acted like a North Korean rocket yesterday. It had an initial boost only to fail miserably a short time later. Natural gas bulls were hoping that yesterday’s gas storage number would possibly give some hope that a bottom in this market may be near. Instead it was another sign that this market is still ready to fizzle. The Energy Information Agency reported a much smaller injection into storage of only 8 bcf from the previous week, far short of the 38 to 40 plus the trade was looking for. The market then blasted off only to fail. I wonder if Kim Jong the younger is bullish gas as well. Despite the fact that this week’s injection was a bit of a disappointment, it is hard to get around the fact that working gas in storage is at a seasonal record 2,487 bcf as of Friday, April 6, and a whopping 888 Bcf higher than a year ago and 920 Bcf above the five-year average of 1,567 bcf.
The reversal and failure to hold onto gains should be an ominous sign to bulls. If you can’t rally off of a miss like that, then you have to expect even further downside pressure.
China’s GDP number was a bit of a disappointment to some and some commodities markets seem to be viewing it in different ways. Some are falling because they fear slowing growth and demand, yet others are rallying because they believe the number gives the Chinese some incentive to stimulate the economy. China’s gross domestic product slowed to 8.1% for the first quarter of 2009. The number seemed to put a bit of hurt on the industrial metals yet grains seemed to like the possibility of more stimulus. Perhaps the Chinese will buy more food to lower prices and increase consumption. Oil prices got a bit of a hit but not as much as some might expect. The general feeling is that the number, while not exceeding the whisper number, was still in the Goldilocks range and could have been worse.
Oil of course rejected $100 a barrel this week and that is not surprising considering the fact that the Iranian situation takes center stage this weekend. If these talks bear any fruit, beware of a major correction to the downside. If they breakdown, you had better get out of the way.