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August gas remains elevated amid supportive weather

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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 gas remains elevated amid supportive weather

Aftera finish 2.9 cents higher at $2.756/MMBtu ahead of the weekend, August naturalgas futures extended gains in overnight trading leading up to the Monday, July18, open, as revisions to weather outlooks that show heat engulfing the entirecountry fueled anticipation of stronger demand and smaller storage injectionsthat should further erode inventory overhangs. The contract waslast seen 2.8 cents higher at $2.784/MMBtu.

UpdatedNational Weather Service forecasts show above-average temperatures encompassingnearly all of the U.S. except for a small portion of the Northwest in theupcoming six- to 10-day period, before overtaking the entire country furtherout to the eight- to 14-day period.

Heatin the current weather forecast looks to ramp up cooling demand in the comingweeks, which would divert natural gas from storage facilities to thepower-generating sector where more fuel will be needed to meet air-conditioningload, suggesting a continuation to what has thus far been a lackluster pace ofinventory-building through the refill season.

Thelatest storage data from the U.S. Energy Information Administration signaled acontinuation to the underperformance of weekly injections against historicalaverages as it outlined a 64-Bcfbuild for the week to July 8 that was below the 95-Bcf injectionseen in the corresponding week in 2015 and the 77-Bcf five-year averageaddition to stocks.

Thereported build took overall inventories to 3,243 Bcf, trimming overhangs to theyear-ago level and five-year average to 507 Bcf and 586 Bcf, respectively.

Preliminaryestimates for the next weekly inventory report that will cover the week to July15 call for another modest injection to stocks ranged from 28 Bcf to 42 Bcf,which would compare against the 61-Bcf five-year-average build and the 70-Bcfinjection in the same week in 2015.

Anongoing slow rate of storage-building would result in a further reduction ofstock surpluses and a tighter supply to end the injection season, which couldforce downside revisions to end-of-season inventory estimates currently peggedat a record of 4,022 Bcf, according to the latest projections from the EIA.

Atthe cash markets, traders on July 15 moved a revised natural gas offering forSaturday-through-Monday flow at predominantly diminished values amid pressurefrom the inclusion of the low-demand weekend days in the package.

Acrossthe key hubs, the charge to the downside was led by Transco Zone 6 NY next-daygas pricing that crumbled by nearly 70 cents to average at $1.810/MMBtu.PG&E Gate spot gas price action followed with a 13-cent decline to an indexat $2.860/MMBtu, then Chicago and benchmark Henry Hub cash gas prices thatdeflated by around 10 cents on average to indexes at $2.626/MMBtu and$2.695/MMBtu, respectively.

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Inregional terms, Northeast spot gas price activity unraveled about 22 cents intransactions averaging at $2.139/MMBtu, as West Coast day-ahead gas priceaction shed almost 15 cents on the session to average at $2.398/MMBtu. Midwestand Gulf Coast next-day gas pricing fell by about 8 cents on average to indexesat $2.557/MMBtu and $2.575/MMBtu, respectively.

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.