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June natural gas ends slightly higher on expected slowdown in storage building

Editor's Note: Please be advised that S&P Global Market Intelligence will no longer publish daily articles on price trends in the U.S. natural gas, electricity and emissions markets beginning June 1, 2018. Pricing data for these energy markets will continue to be available on the Market Intelligence platform.

June natural gas futures managed to hold the upside Wednesday, May 23, as participants look to a storage report that is expected to reflect higher demand with a step down in the rate of storage building in the week to May 18.

The natural gas inventory report slated for release at 10:30 a.m. ET on May 24 by the U.S. Energy Information Administration is expected to show a storage injection from 84 Bcf to 95 Bcf, with a consensus estimate pegged at a 90-Bcf build. The latest figure would compare with a 106-Bcf injection reported for the week to May 11, as well as a 74-Bcf injection for the same week in 2017 and the 89-Bcf five-year average build.

The 106-Bcf build reported for the week ended May 11 was larger than the anticipated 104-Bcf injection and was above the respective year-ago and five-year average injections of 64 Bcf and 87 Bcf. The build brought total U.S. working gas supply to 1,538 Bcf, or 821 Bcf below the year-ago level and 501 Bcf below the five-year average storage level of 2,039 Bcf.

An injection at consensus would drive the total working gas inventory to 1,628 Bcf, and would shrink the year-on-year deficit to 805 Bcf, and trim the year-on-five-year-average deficit to 500 Bcf.

The upcoming storage data will partially reflect warmer weather during the review week to May 16, when natural gas consumption jump 4%. And despite the modest improvements to the working gas supply, the slower rate of storage building is worrisome given weather forecasts that point to additional warming and stronger demand ahead.

Updated National Weather Service forecasts for the six- to 10-day and eight- to 14-day periods continue to show above-average temperatures enveloping nearly the entire country. Average temperatures remain confined to portions of the Southeast, while below-average temperatures do not appear in outlooks.

The warmer weather and increased cooling demand could further impact the rate of storage building and impede the market's ability to rebuild the working gas supply to a healthy level by the end of injection season.

Natural gas inventories would need to build by an average 12 Bcf/d to reach an end-of-season inventory topping 3.5 Tcf, according to the American Gas Association.

Calming worries and limiting the upside, as natural gas demand is slated to rise, an elevated rig count implies an impending growth in production. The total rig count in the week to May 18 reached 1,046, or 145 rigs above the corresponding week a year earlier.

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.