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August natural gas gains as market assesses fundamentals

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Essential Energy Insights - February 2021

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Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021


August natural gas gains as market assesses fundamentals

Augustnatural gas futures were higher Tuesday, July 12, reversing with the support ofdemand expectations as summer heat drives cooling demand, increasing powersector reliance on natural gas-fired generation.

Thecontract explored the downside early, finding a $2.687/MMBtu low, but reversedthe retreat to trade as high as $2.751/MMBtu and finish 3.2 cents higher at$2.734/MMBtu.

Participantscontinue try to gauge demand driven by above-average temperatures forecasts togrip nearly the entire U.S. in the six- to 10-day and eight- to 14-day periods,against a natural gas inventory that despite small injections through theinjection season thus far, is expected to end the season at an end-of-Octoberrecord high of 4,022 Bcf according to the latest , revised down from theprevious projection of 4,131 Bcf.

Thenatural gas supply remains robust even as weekly storage injections haveunderperformed against historical averages. The supply currently rests at 3,179Bcf, after a 39-Bcf injectioninto inventories for the week to July 1. Although improving the total supplythe build cut the surplus to the year-ago level to 538 Bcf and cut theyear-on-five-year-average surplus to 599 Bcf.

Analystsand traders are looking for a build to stocks in the week to July 8 ranged from46 Bcf to 55 Bcf, which although a step above the previous string of modestbuilds, will still compare bullish against a 77-Bcf five-year-average injectionand a 95-Bcf build reported for the same week in 2015. With earlyestimates clustering around a 50-Bcf net injection, a step higher from the 39Bcf refill in the prior week, Citi Futures analyst Tim Evans noted, "thismostly only reflects a normal drop in industrial demand over the July 4thholiday."

Still,even with the trimming of the storage overhangs, the market remains in astruggle to find footing with the impressive total supply casting a shadow overthe recovery.

Spot-gasmarkets were lower with the influence of declining demand projections thatsignal lower demand for natural gas to fuel power generating facilities.

AtTransco zone 6 NY trades were nearly 5 cents lower to an average near $2.00,while Tetco-M3 bucked the wider trend with a gain of nearly 5 cents to an indexaround $1.50. Benchmark Henry Hub deals softened nearly 10 cents to around$2.75, as Waha averaged near $2.70, lower by more than 5 cents. Gas at Chicagoslipped more than 5 cents to an average around $2.70. In the West, SoCal Bordertrades were about 10 cents lower to an index below $2.70, and PG&E Gategave back more than 1 cent to an index near $2.90.

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.