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June natural gas futures little changed overnight

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Essential Energy Insights - September 17, 2020

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Rate case activity slips, COVID-19 proceedings remain at the forefront in August


June natural gas futures little changed overnight

Followinga 4.4-cent advance in the prior session to a settle at $2.086/MMBtu, Junenatural gas futures drifted near unchanged overnight ahead of the Wednesday,May 4, open, as traders considered production woes alongside lacklusterweather-related demand expectations. The front-month contract waslast traded at $2.071/MMBtu, down 1.5 cents overnight.

Althoughthe latest productiondata from the U.S. Energy Information Administration released April29 show an accelerated increase in U.S. gross natural gas production inFebruary, market worries concerning a significantly diminished rig count andits effect on production continue to plague the market. Grossnatural gas production climbed by 1.0%, or 0.95 Bcf/d, to 92.02 Bcf/d inFebruary, from 91.07 Bcf/d in January, as a month-on-month drop in most stateswas undermined by gains in states covering the Marcellus and Utica formations,as well as in Texas and New Mexico, the EIA said in its latest "MonthlyCrude Oil and Natural Gas Production" report.

Meanwhile,the latest rig count report from Baker Hughes Inc. shows that the U.S. total rig countmade another sharp decline in the week ended April 29, falling by 11 toreach a record low of 420. Oil rigs accounted for the bulk of the decline as itdecreased by 11 to reach 332, while the number of rigs targeting natural gasslumped by one to a record low of 87 and miscellaneous rigs increased by one toreach one.

Limitingthe upside momentum driven by production woes, however, are healthy storagelevels and weather forecasts that signal demand erosion ahead that should allowfor storage building to pick up pace in the coming weeks. Naturalgas inventories remain elevated at 2,557 Bcf, or 870 Bcf above the year-agolevel and 832 Bcf above the five-year average of 1,725 Bcf, after the EIAreported a net 73-Bcfinjection to stocks for the week to April 22.

Coolerweather that resurfaced in key heating regions in the week to April 29 isexpected to have undermined storage-building when the next inventory data isreleased on Thursday, May 5, as market participants anticipate an addition tostocks of anywhere from 56 Bcf to 75 Bcf.

Butas midrange weather projections show the prevalence of milder conditions ahead,demand for natural gas for heating that is expected to deflate and coolingrequirements that will likely remain limited ahead of the onset of summer lookto allow for natural gas to flow more freely into underground storagefacilities, thereby augmenting already robust supplies.

TheNational Weather Service forecast map for the six- to 10-day period reflectsabove-average temperatures over portions of the Eastern Seaboard and a majorityof the West, accompanied by average temperatures over most of the interior ofthe East, parts of the central U.S. and a small area of the Rockies.Below-average temperatures are indicated only for a tiny patch of theNortheast, the fringes of the Midwest and a section of the west-central U.S.

Above-averagetemperatures linger over parts of the Eastern Seaboard and overtake nearly allof the West in the eight- to 14-day outlook, as below-average temperaturesshrink in scope to settle only over the fringes of the Midwest and a smallerarea of the west-south-central U.S. Average temperatures hold over a majorityof the central and eastern U.S.

Incash trading, varied but overall supportive weather-driven demand drove naturalgas prices for day-ahead delivery higher in much of the country May 3.

Acrossthe major hubs, the charge to the upside was led by Chicago spot gas pricesthat rose by nearly 9 cents on average to an index at $2.068/MMBtu. PG&EGate next-day gas price activity followed with a better-than-4-cent increase toan index at $2.058/MMBtu, then benchmark Henry Hub day-ahead gas price actionas it picked up 3 cents on the session to average at $1.940/MMBtu. Transco Zone6 NY hub pricing trailed in the advance as it clawed up by just a little morethan 1 cent to an index at $1.870/MMBtu.

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On aregional basis, Midwest cash gas pricing notched a better-than-6-cent gain intransactions averaging at $1.964/MMBtu, as West Coast day-ahead gas priceactivity added almost 9 cents on the session to average at $1.793/MMBtu. GulfCoast spot gas prices were bolstered by nearly 4 cents on average to an indexat $1.862/MMBtu, while Northeast next-day gas price action was lifted by around6 cents to an index at $2.010/MMBtu.

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Marketprices and included industry data are current as of the time of publication andare subject to change. For more detailed market data, including power andnatural gasindex prices, as well as forwards and futures, visitour Commodities Pages.