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August natural gas reverses larger losses, ends only slightly lower

Augustnatural gas futures finished lower Thursday, July 7, edging lower in spite of astorage injection that once again failed against expectations and historicalaverages. While ticking up to a $2.841/MMBtu intraday high, the contractstumbled and finished 0.9 cent lower at $2.777/MMBtu.

Themarket's initial response to the latest natural gas inventory report from theU.S. Energy Information Administration was higher as the showed a modest 39-Bcf injectionthat was below the 44-Bcf consensus outlook and well below the 77-Bcffive-year-average build and the 83-Bcf build reported for the same week in 2015.

Havingdigested the storage injection, participants took a longer view of the market,quelled by the total working gas supply sitting at 3,179 Bcf, still acomfortable 538 Bcf above the year-ago level and 599 Bcf above theyear-on-five-year average.

Fundamentals,however, remain largely bullish and helped to reverse the greater intradaylosses to a low at $2.725/MMBtu.

Weatherforecasts call for above-average temperatures to grip the eastern U.S. andmajority of the central U.S. in both the six- to 10-day and eight- to 14-dayperiods, the National Oceanic and Atmospheric Administration weather maps show.Below-average temperatures grip a portion of the central U.S. and the majorityof the West, while average temperatures grip areas of both regions through thelonger-range view.

Heatin the East and Midwest will keep natural gas demand strong, but the call fornatural gas for power burn will be limited somewhat by the cooler weather inthe West.

Strongerdemand in any case will butt up against natural gas production that has slowedin recent weeks. Some of the reasons for production loss include flooding inWest Virginia and the explosion at Enterprise Product Partners' processingplant in Pascagoula, Miss., the American Gas Association said in its June 30edition of the Natural Gas Market Indicators.

Fundamentallystrong, market participants are still eyeing the natural gas inventoryand expectations for a comparatively large build for the current week, when theEIA releases its next inventory report Thursday, July 14.

Pricingnatural gas in the day-ahead markets followed the expectation for milderweather in portions of the Northeast and heat across the majority of thecountry.

Inthe Northeast, Transco Zone 6 NY trades were about 5 cents higher withcongestion helping to keep values supported above $2.90, while TETCO-M3 tradedabout 10 cents lower to an index below $1.60. At the Henry Hub, strong demandsupported a gain of about 10 cents to an index near $2.85. Chicago trades weresimilarly higher to an index atop $2.75, Waha traded more than 10 cents higherto an index atop $2.65, SoCal Border trades were nearly 15 cents higher to anindex atop $2.55 and PG&E Gate traded about 5 cents higher to an averagenear $2.70.

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. To view detailed EIA Weekly Natural Gas Storagedata, go to our Natural GasStorage Page.