After making a rapid rise to $5 per million British thermal units last Friday, natural gas turned down sharply this week, falling to $4.53 on Friday morning. This 9 percent plummet came in response to negative economic news and renewed concerns about the continued supply glut.
Energy Information Administration data released Thursday showed that natural gas storage had swelled to record levels, rising to 3.589 trillion cubic feet, a 16 percent increase year over year. On Thursday, the stock markets also lost more than 2 percent, which pulled natural gas down further as traders were concerned about a lack of future demand.
Natural gas is used heavily for heating, which some traders hope will help boost prices as winter approaches. Yet the fossil fuel also has widespread industrial applications, causing traders to watch general economic indicators closely as demand for natural gas use is often tied to the strength of the economy as a whole.
Wheat: The Department of Agriculture crop production report released Wednesday confirmed traders' fears that the wheat market was oversaturated and would continue to be weighed down by increasing production. The USDA data showed that grain stocks were 19% higher than last year, more than most analysts had expected.
This abundance of wheat drew the December wheat contract at the Chicago Board of Trade down to a new contract low at $4.395 a bushel on Wednesday. Wheat has declined sharply since making an all-time high in February 2008 at $13.345, a 67 percent decline in less than two years. With an excess of supply and meager consumption, some traders have been left wondering how low wheat can go.
Gasoline: Despite economic weakness that dragged many commodities downward, gasoline prices surged this week as drivers drew down gasoline stores nationwide. November unleaded gasoline traded in New York rose 10.3 cents (6.3 percent) this week. In addition to increased gasoline use, there have also been continued concerns about the negotiations between Iran and the West, which have given crude oil and its products a boost in recent weeks.
Opinions are solely the writer's. Walt Breitinger is vice president of commodities at Wells Fargo Advisors LLC. He can be reached at (219) 738-6460.
