June natural gas futures ticked higher, as traders squared books ahead of the contract's expiration at the close of business Friday, May 26. The contract rolled off the board 5.2 cents higher at $3.236/MMBtu, while a gain of 3.5 cents brought the now-lead July contract to a settle at $3.310/MMBtu.
Gains are supported by weather outlooks that suggest an increase in electric-power sector demand alongside a boost in demand for liquefied natural gas.
In its June-August outlook, The Weather Company outlined warmer-than-normal conditions across all of the major population centers of the western, southern and eastern U.S. for the three-month period.
Jeff Richter, principal at Energy GPS, which partnered with The Weather Company in the outlook, said power burn in June will be the key component to determine how the curve is priced, while the warmer-than-normal forecast in most parts of the country in July will help sustain decent power burns and keep the price supported.
Further out, production could hold the key to keeping a lid on prices as power burn will combine with new demand for LNG for Sabine Pass LNG's Train 4 in August, Richter said.
Gains, however, remain limited by the uncertainty of the longer-range forecasts and by the more reliable midrange projections that are less supportive of demand.
Mostly average and below-average temperatures in the eastern two-thirds of the country in the six- to 10-day period should limit demand for either heating or cooling given the calendar, while mostly normal temperatures across the eastern two-thirds of the country in the eight- to 14-day period should counter the arrival of some above-average temperatures in the Northeast, and the continuing above-average temperatures in portions of the Southeast and the majority of the West.
"The short term weather forecasts remain more shoulder season like rather than summer cooling like over major parts of the country," Energy Management Institute principal Dominick Chirichella said.
"Natural Gas cooling related demand is not likely to surge through the first half of June and as such upcoming inventory injections should be in sync with the historical injections for the same timeframe," he said.
Natural gas inventories built by a net 75 Bcf during the week ended May 19, a build that was above market expectations that called for a 70-Bcf build in stocks, as well as the 71-Bcf injection reported for the same week in 2016. The build missed the five-year average injection of 90 Bcf.
The total U.S. working gas supply now sits at 2,444 Bcf, or 371 Bcf below the year-ago level and 241 Bcf above the five-year average storage level of 2,203 Bcf.
The still healthy surplus to the five-year average provides the market with downside pressure despite the deficit to the record year-ago supply.
Further, injections through the end of October are expected to bring the total working gas inventory closer to record high levels.
A revised Saturday-through-Tuesday package traded in the day-ahead markets at values mixed by weather and demand outlooks.
Large losses around 35 cents at Transco Zone 6 NY and around 30 cents at Tetco-M3 drove indexes to near $2.35 and $2.45 at the hubs, respectively. Waha and Chicago slipped about 10 cents and 5 cents, respectively, to indexes near $2.80 and $2.95. SoCal Border trades were about 10 cents lower to an index near $2.80 and PG&E Gate trades were about 5 cents lower to an index near $3.35. Conversely, Henry Hub trades were about 5 cents higher and averaged near $3.10.
Market prices and included industry data are current as of the time of publication and are subject to change. For more detailed market data, including power, natural gas index prices, as well as forwards and futures, visit our Commodities Pages.