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June natural gas still seeking direction amid changing fundamentals

Editor's Note: Please be advised that S&P Global Market Intelligence will no longer publish daily articles on price trends in the U.S. natural gas, electricity and emissions markets beginning June 1, 2018. Pricing data for these energy markets will continue to be available on the Market Intelligence platform.

June natural gas futures finished another seesaw session slightly negative Tuesday, May 15, as the market remains caught between changing fundamentals. The contract shed 0.6 cent to settle at $2.836/MMBtu while trading from $2.830/MMBtu to $2.864/MMBtu.

Concerns around rebuilding natural gas inventories ahead of the next major demand period is driving the market as participants look to weather and rig count data for implications on demand and production.

Recent and projected warm weather has resulted in an early uptick in cooling demand and a sharp decline in heating demand, allowing natural gas inventories to begin the rebuilding process.

Warmer weather during week ended May 9 drove a 14% increase in power burn week on week but also a 37% drop in residential/commercial-sector demand, according to the U.S. Energy Information Administration's latest "Natural Gas Weekly Update." Total U.S. gas consumption was down 4% on the week.

Additional warm weather is in store in the coming weeks and months. Midrange National Weather Service outlooks suggest above-average temperatures over nearly the entire country through both the upcoming six- to 10-day and eight- to 14-day periods, while the longer-range projection from AccuWeather calls for warmer-than-normal weather over a large part of the U.S. for April through June.

As overall demand declines, the combined U.S. oil and natural gas rig count was up 13 in the week to May 11 to 1,045, implying higher production in the months ahead.

Amid the fundamental changes, after a three-week delay, natural gas inventories began rising in the week to April 27 with a 62-Bcf injection reported for the week, that was followed by a net 89-Bcf injection in the week to May 4, to a total working gas inventory of 1,432 Bcf.

Still, 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 arrival of unseasonably warm weather keeping upside support in the market.

Injections of about 12 Bcf per day on average would be needed for working gas inventories to reach above 3.5 Tcf by early November, the American Gas Association said in its latest "Natural Gas Market Indicators" report. "Based on the past week's report we are right on that pathway," the EIA said.

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.