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September gas notches additional gains on technical buying

After advancing by 2.7 cents in the week's opening session to settle at $2.801/MMBtu, NYMEX September natural gas futures extended higher overnight ahead of the Tuesday, Aug. 8, open amid ongoing technical buying and despite continued fundamental weakness. At 6:50 a.m. ET (1050 GMT), the contract was 0.7 cent higher at $2.808/MMBtu.

Revised National Weather Service outlooks for the six- to 10-day and eight- to 14-day periods show average to below-average temperatures enveloping the bulk of the country. Above-average temperatures are expected to be contained to the fringes of the Northeast, edges of the Southeast, the lower tier of Texas and parts of the West in the shorter-range view, but are forecast to shift in scope to settle over the Northeast, upper border of the Midwest, Florida, a section of Texas and portions of the Southwest in the longer-range view.

Although the appearance of heat over portions of major consuming regions in the East could prop up cooling load, demand support looks to remain limited amid the prevalence of milder to cooler weather in forecasts.

Lackluster weather-driven demand support should leave more natural gas unutilized and available to be moved into underground storage facilities, thereby improving what has thus far been a predominantly sluggish pace of inventory rebuilding.

Storage injections have trailed the five-year average most weeks this refill season, with the latest report of a 20-Bcf build for the week ended July 28 extending the trend as it defied the 3-Bcf pull in the prior year, but missed consensus estimates and the 44-Bcf five-year average addition to stocks. It took total working gas stocks to 3,010 Bcf, or 279 Bcf below the year-ago level and 87 Bcf above the five-year average of 2,923 Bcf.

The latest storage report week marks only the third time that working gas stocks breached the 3,000-Bcf mark this early in the refill season. Natural gas inventories reached 3,006 Bcf on June 15, 2012, and 3,041 Bcf on June 10, 2016, but prior to this did not pass the 3,000-Bcf threshold until September.

Larger builds to stocks amid a dearth of weather-related demand in the coming weeks should keep inventories on a path toward a robust end-of-season level.

Meanwhile, the National Hurricane Center is currently monitoring two weather disturbances, though neither is yet expected to have any impact on natural gas production.

Tropical Storm Franklin was last located at 4 a.m. CT on Tuesday about 45 miles north of Chetumal, Mexico, packing maximum sustained winds of 50 mph as it moves toward the west-northwest at 14 mph. A west-northwest to westward motion is expected during the next couple of days as Franklin moves across the Yucatan Peninsula and emerges over the Bay of Campeche on Wednesday. Weakening is expected Tuesday, while restrengthening is forecast into tonight and Wednesday.

An area of low pressure producing disorganized cloudiness and showers was also located about 900 miles east of the Lesser Antilles. Some development of this system in anticipated over the weekend, as it tracks west-northwestward at about 15 mph over the western Atlantic. It is given a 20% chance of formation over the next five days.

At the cash markets, mostly supportive demand expectations encouraged the upside to prevail in price activity for natural gas booked Monday for Tuesday flow.

At the major delivery locations, the charge higher was led by Transco Zone 6 NY day-ahead gas price action that notched a roughly 19-cent increase in deals averaging at $1.950/MMBtu. Benchmark Henry Hub spot gas prices followed with an almost 4-cent advance on average to an index at $2.797/MMBtu, then PG&E Gate hub activity that tacked on about 1 cent on the session to average at $3.192/MMBtu. Chicago next-day gas pricing was unchanged day on day at an index at $2.676/MMBtu.

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On a regional basis, Northeast cash gas price activity added nearly 9 cents in trading to average at $2.112/MMBtu, as Gulf Coast next-day gas pricing clawed up by about 1 cent to an index at $2.683/MMBtu. West Coast day-ahead gas price action bucked the broad uptrend with a roughly 5-cent decline in transactions averaging at $2.387/MMBtu, while Midwest spot gas prices were lifted by almost 2 cents on average to an index at $2.573/MMBtu.

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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 and natural gas index prices, as well as forwards and futures, visit our Commodities Pages.