Editor's Note:
After ending the prior session up 4.4 cents at $2.859/MMBtu, NYMEX June natural gas futures deflated overnight in profit-taking ahead of the Friday, May 18, open. At 7:10 a.m. ET, the contract was 0.2 cent lower at $2.857/MMBtu.
Natural gas inventories notched the first triple-digit injection of the season with the 106-Bcf build reported in the U.S. Energy Information Administration's latest data for the week ended May 11. That bested consensus estimates coming into the day as well as both the 64-Bcf prior-year injection and an 87-Bcf five-year average build.
Total working gas stocks sit at 1,538 Bcf, or 821 Bcf below the year-ago level and 501 Bcf below the five-year average of 2,039 Bcf.
Warmer weather that drove heating demand and cooling load in diverging directions during the storage report week is seen extending into the weeks ahead.
Warmer conditions during the storage report week drove a sharp decline in heating demand that allowed for the increase in the pace of inventory rebuilding but also generated early cooling demand. Additional warming in the subsequent days is seen to have kept cooling load elevated, helping drive gains in total U.S. gas demand.
Temperatures that rose past 75 degrees F in portions of Texas and the Southeast triggered an 8% increase in power burn during the week ended May 16 versus the prior-week level, which led the 4% uptick in total U.S. gas consumption over the week, the EIA said in its latest "Natural Gas Weekly Update." Residential/commercial-sector demand was up 3% as much of the West and Northeast was cooler than in the week ago.
Updated National Weather Service outlooks for the midrange call for ongoing warming as above-average temperatures remain reflected over nearly the entire country through the six- to 10-day and eight- to 14-day periods.
"We continue to look for the possibility of a two-sided trade because projected warm weather suggests low heating demand, but the building of cooling demand could have a mixed impact on the rate of subsequent storage injections," FX Empire analyst James Hyerczyk said in a note.
Production-side fundamentals feed downside momentum, however, as the steadily rising U.S. combined rig count spells impending growth in production that should leave more natural gas available to flow into underground storage facilities.
The American Gas Association sees injections of about 12 Bcf/d on average being necessary to bring inventories above 3.5 Tcf by early November.
Cash gas prices were predominantly tethered to the downside Thursday by expectations of weaker demand.
Looking at the key delivery locations, an almost 12-cent decrease steered Chicago next-day gas pricing to an index at $2.378/MMBtu as a 10-cent decline took benchmark Henry Hub spot gas price action to an average at $2.750/MMBtu. An approximately 5-cent reduction nudged PG&E Gate day-ahead gas price activity to an average at $2.865/MMBtu as a roughly 29-cent gain against the wider downdraft drove Transco Zone 6 NY hub pricing to an index at $2.593/MMBtu.
Regionally, Midwest cash gas price activity logged a near 9-cent retreat in deals averaging at $2.339/MMBtu, while Gulf Coast and West Coast next-day gas prices faltered by about 5 cents on average to indexes at $2.669/MMBtu and $1.836/MMBtu, respectively. Northeast spot gas pricing shed about 2 cents on the session to average at $2.238/MMBtu.
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