NYMEX gas futures mark second day of losses amid profit-taking, cooler outlook

Following a bullish first half of the week for NYMEX front-month natural gas futures, sellers took control of the market toward the latter part of the week with prices seeing losses May 19 and 20.

At the end of trading on May 20, the NYMEX June 2022 natural gas futures contract shed 22.5 cents to close at $8.083/MMBtu but still managed to tack on 42 cents for the week when weighed against the May 13 closing price.

The downside action stemmed from profit-taking based on a cooler temperature outlook for the central portion of the US over the next several days, including Texas, which is the largest natural gas consuming state in the US. With the expiration of the NYMEX June gas futures contract coming up the week of May 22, gas market players will be mainly focused on early June temperatures, which appear to be evolving toward less hot conditions, according to the major weather forecast models.

The Energy Information Administration (EIA) reported a gas storage build of 89 Bcf for the week ended May 13, which was perceived as generally neutral compared to market expectations, the upcoming storage report for the week ending May 20 should come in more bullish. This is because the storage injection will be reflective of sweltering temperatures across key demand areas of the nation. Gas market participants are projecting a storage build ranging from as little as 69 Bcf to as much as 80 Bcf due to exceptionally warm temperatures across the Great Plains and the southern tier of the US for the reflective storage week.

Spot market

In the spot market, physical natural gas prices were mixed to higher in the eastern portion of the US as widespread above-average temperatures move into the region over the weekend, while cash prices saw losses virtually everywhere else across the nation due to cooler conditions.

Spot at Tennessee Zone 6, delivered North was the high price leader, averaging $9.745/MMBtu for the May 20 and 21, up $1.39/MMBtu. Algonquin, city-gates, which serves the Boston market, rose 58 cents to average $8.48/MMBtu.

Meanwhile, cash prices at the NYMEX-sensitive Henry Hub shed 19.5 cents at $7.975/MMBtu. Katy came off 21.5 cents to average $7.79/MMBtu as the weather forecast models show the potential for heavy rainfall to move into the Lone Star State and linger in place for a few days, which will take a Texas-sized bite out of recent scorching temperatures in the region.

Despite an impressive very late-season snowstorm that is taking aim at cities such as Denver, Colorado, spot prices at nearby hubs saw losses in the Rockies. The Cheyanne Hub went down 25 cents to average $7.54/MMBtu, while the White River Hub came off 27.5 cents to $7.505/MMBtu. It was much of the same story further West, with SoCal Gas losing 38 cents to average $7.60/MMBtu, while PG&E city-gate eroded 15 cents to $9.58/MMBtu. On the Redwood Path, PG&E Malin was down 12 cents to average $7.66/MMBtu.

LNG, power burn

NYMEX front-month gas futures are likely to remain rangebound to the $7.50/MMBtu to $8.50/MMBtu level amid an intensifying tug of war between bullish and bearish market participants. Bullish market players are enthusiastic about rising LNG feedgas demand, which is now sitting at about 13 Bcf/d, a level that hasn't been seen since early April.

Meanwhile, dry gas production remains sluggish at around 95 Bcf/d, while power burn demand is averaging over 6 Bcf/d compared to year-ago data. Gas market bears are pointing to near-term cooler temperatures and the potential dry gas production to finally gain traction in the weeks ahead, owing to the robust increase in active oil and gas rigs in recent months.