Editor's Note:
June natural gas futures lacked direction in the week's closing session Friday, May 11, seesawing between modest gains and losses before closing the day in shallow negative territory. The contract settled 0.8 cent lower at $2.806/MMBtu while trading from $2.793/MMBtu to $2.818/MMBtu.
Natural gas inventories are improving after a three-week delay to the injection season. Following a net 62-Bcf injection in the week to April 27, which marked the first build of the season, underground natural gas inventories were up a net 89 Bcf in the week to May 4 to a total of 1,432 Bcf.
The improvement to inventories and the downside pressure on the market come amid the destruction of heating demand as the U.S. Energy Information Administration reported total U.S. consumption of natural gas down 4% week on week in the week to May 9. The lower consumption was predominantly driven by a 37% combined decrease in consumption in the residential and commercial sectors because of warmer weather.
Despite the improved rate in storage building, inventories stand 863 Bcf below the year-ago level and 520-Bcf below the five-year average storage level of 1,952 Bcf, with the deficits and the early arrival of unseasonably warm weather keeping upside support in the market.
The EIA said increased temperatures in the week to May 9 supported natural gas consumption for power generation up 14% week over week, with the largest increase in natural gas use for electric power generation coming from the Southeast.
Weather forecasts imply a continued boost to power-sector consumption. The latest six- to 10-day and eight- to 14-day forecasts from the National Weather Service show above-average temperatures lingering over a majority of the country, even as average temperatures initially contained to a few areas of the Midwest and Southwest are expected to eventually overtake slightly more of the Midwest and much of the West. Below-average temperatures are called to be contained to a small section of the Southwest through both periods.
Longer range, AccuWeather's latest seasonal forecast anticipates volatile weather patterns over the key cooling Northeast and mid-Atlantic regions over the summer, with generally warmer-than-usual conditions likely by the end of June.
To answer rising demand, the U.S. rotary rig count continues to climb, suggesting that natural gas production will remain robust. The combined oil and natural gas rig count in the U.S. was up 13 in the week to May 11 to 1,045, according to the latest North American Rotary Rig Count. The total count sits 160 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.
