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NYMEX September gas rises as warmer weather intensifies supply concerns

  • Author
  • Arsalan Syed
  • Editor
  • Derek Sands
  • Commodity
  • Natural Gas

Houston — The NYMEX September natural gas futures contract increased Tuesday 3.7 cents to settle at $2.897/MMBtu as the market picks up strength amid expected warm weather and supply concerns.

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The front-month contract traded Tuesday between $2.857/MMBtu and $2.900/MMBtu.

Even though power burn and production backed off from recent levels, the market picked up strength as supply concerns and warmer weather expected in mid-August added to bullish sentiment.

US dry gas production fell 1.4 Bcf/d day on day to 79.8 Bcf/d Tuesday, as production dipped in the Rockies and fell 700 MMcf/d, according to S&P Global Platts Analytics data.

This marks the lowest level dry gas production has seen since June 26, but dry production has averaged 80.56 Bcf/d since that time.

The strong production seen in the summer months has not made the storage deficit smaller as power burn records were set during the warmer-than-average summer.

Looking ahead, the most recent six- to 10-day temperature forecast from the National Weather Service calls for higher-than-average temperatures for most of the Upper Midwest and Northeast, which is expected to add to the strength the market has experienced lately.

Traders, analysts and other market sources have been debating about the market's position in terms of supply, and about whether current production is strong enough to make up for deficit. Bullish fundamentals of the storage deficit are currently being counteracted by the bearish strong production the market has seen, according to David Thompson, executive vice president at PowerHouse brokerage.

Looking ahead to the NYMEX winter strip, the December, January and February futures contracts were all trading above $3/MMBtu for the second consecutive day Tuesday. The front-month and winter strip have both gained some momentum as supply concerns intensify.

The NYMEX settlement price is considered preliminary and subject to change until a final settlement price is posted at 7 pm EDT (2300 GMT). --Arsalan Syed, arsalan.syed@spglobal.com

--Edited by Derek Sands, derek.sands@spglobal.com