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August natural gas ends 3 cents lower ahead of midweek expiration

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Essential Energy Insights - January 2021


August natural gas ends 3 cents lower ahead of midweek expiration

Initiallyextending prior-session gains,August natural gas futures reversed lower by the Monday, July 25, close,shrugging off overall supportive market fundamentals.

Movingfrom $2.728/MMBtu to $2.818/MMBtu on the day, the August gas futures contract,which rolls off the board at the close of business July 27, settled at$2.747/MMBtu on Monday, down 3.0 cents on profit taking. September gas futuresended the session at $2.712/MMBtu, easing 3.1 cents.

Despitethe day's loss, shrinking inventory overhangs and forecasts for lingering heatacross major demand centers that should allow for a further tightening of thesupply/demand balance are likely to remain sources of support for the gasmarket.

Accordingto the U.S. Energy Information Administration's latest , a net 34 Bcf was injected intonatural gas storage during the week ended July 15. The figure, which comparedto the 70-Bcf addition seen in the corresponding week in 2015 and the 61-Bcffive-year average injection, boosted overall inventories to 3,277 Bcf, cuttingdown surpluses to the year-ago level and five-year average to 471 Bcf and 559Bcf, respectively.

Withforecasters calling for hot weather for the central and eastern U.S. in thecoming weeks, cooling demand should remain elevated and allow for acontinuation of the string of smaller-than-average storage injections and thefurther erosion of inventory overhangs.

Earlyestimates from market analysts and traders are calling for a natural gasstorage injection of 21 Bcf to 33 Bcf for the week ended July 22. This wouldcompare to the 52-Bcf year-ago injection and the 52-Bcf five-year averageaddition.

Fartherout, the National Weather Service is projecting above-average temperaturesacross much of the country in the upcoming six- to 10-day period, leaving anarea of the central U.S. and portions of the West to see average tobelow-average conditions during the period.

Inthe eight- to 14-day period, the weather service is calling for above-averagetemperatures to remain in place across a bulk of the U.S., with the exceptionof much of the West, the Pacific Northwest and a sliver of the Upper Midwest.

Incash trading, natural gas markets at major regional hubs were mostly lower inthe week's opener, in tandem with the session's weakness in futures.

Inthe Northeast, gas at Transco Zone 6 NY was quoted at an index near$2.80/MMBtu, losing 5 cents or so in value on the session. In the producingregion, spot gas at the benchmark Henry Hub market in Louisiana was up morethan 2 cents to an average about $2.80/MMBtu.

Inthe Midwest, next-day gas at Chicago was at an index at $2.75/MMBtu, stumblingalmost 10 cents. Out West, gas at PG&E Gate saw an average just shy of$3.15/MMBtu, little changed on the day. Deals at SoCal Border were at an indexaround $2.95/MMBtu, tumbling about 50 cents on the session.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including our power,naturalgas and coalindex prices, as well as forwardsand futures,visit our Commodities Pages.