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August gas remains weak on end-of-season storage estimates

Aftera settle down 3 centsat $2.747/MMBtu in the week's opening session, August natural gas futurescontinued to shed value overnight ahead of the Tuesday, July 26, open andoptions expiration at the close, as pressure from prospects for record-highend-of-season inventories undermine support from expectations for acontinuation of the slow pace of storage-building and warmer weather forecasts.At last look, the August gas futures contract was down 2.0 cents to $2.727/MMBtu,while the September contract eased 2.1 cents to $2.691/MMBtu.

Inits latest storage report, the U.S. Energy Information Administration outlineda net 34-Bcf additionto stocks for the week to July 15 that extended the streak ofsmaller-than-average builds that has dominated the refill season thus far, asit compared against a 70-Bcf injection seen in the corresponding week in 2015and the 61-Bcf five-year average build. The reported build tooktotal stocks to 3,277 Bcf, or 471 Bcf above the year-ago level and 559 Bcfabove the five-year average of 2,718 Bcf.

Preliminaryoutlooks for the next weekly inventory data that will cover the week to July 22suggest an addition to the string of lackluster injections, as estimates callfor a build of anywhere from 21 Bcf to 33 Bcf, which would compare against a52-Bcf year-ago injection and the 52-Bcf five-year average build.

Forecastsfor widespread warming through early August spell elevated cooling demand thatcould divert natural gas away from storage facilities and toward theelectric-power sector in the weeks ahead, as utilities look to naturalgas-fired generators to meet air-conditioning load. This would translate topotential additions to the series of below-average storage injections.

TheNational Weather Service sees above-average temperatures enveloping a majorityof the country in the upcoming six- to 10-day period, save for a wide area ofthe south-central U.S. and parts of the West that are projected to beencompassed by average to below-average temperatures.

Inthe eight- to 14-day period, above-average temperatures are expected toovertake the entire eastern two-thirds of the country and portions of the West,as average to below-average temperatures linger over the balance of the West.

Yet,notwithstanding the anticipated impact of weather-related demand onstorage-building, estimates for end-of-season inventories remain hefty.Having exited the heating season in March with 2,494 Bcf in inventories, eventhe modest storage builds through the injection season to date are seen to haveset up stocks for a record-high end-of-October level estimated at 4,022 Bcf,according to the EIA.

Incash activity, natural gas prices for day-ahead flow were mixed but mostlylower at the start of the fresh workweek, as predominantly declining demandforecasts combined with the day's weakness at the futures complex.

Acrossthe key hubs, a better-than-9-cent decline took Chicago spot gas pricing to anindex at $2.740/MMBtu, as an 8-cent reduction on average steered Transco Zone 6NY next-day gas prices to an index at $2.750/MMBtu. By contrast, an uptick ofalmost 4 cents drove benchmark Henry Hub cash gas price activity to an index at$2.838/MMBtu, as a near 1-cent gain brought PG&E Gate hub action to anindex at $3.129/MMBtu.

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Regionally,Midwest day-ahead gas prices slumped by about 2 cents on average to an index at$2.685/MMBtu, while Northeast cash gas price activity notched a near 9-centincrease against the wider decline in trades averaging at $2.470/MMBtu. GulfCoast next-day gas pricing floundered by less than 1 cent to an index almostunchanged day on day at $2.711/MMBtu, as West Coast spot gas price actionunraveled roughly 9 cents on the session to average at $2.643/MMBtu.

Market prices and included industry data are currentas of the time of publication and are subject to change. For more detailedmarket data, including power andnatural gasindex prices, as well as forwards and futures, visitour Commodities Pages.