After tumbling another 6.3 cents in the prior session to a finish at $3.008/MMBtu, NYMEX July natural gas futures attempted to recover, only to turn back lower overnight ahead of the Friday, June 2, open as fresh technical buying ran up against little in the way of fundamental support. At about 6:45 a.m. ET (1045 GMT), the contract was 0.6-cent lower at $3.002/MMBtu, while trading a range from $2.989/MMBtu to $3.051/MMBtu.
July gas has remained tethered to the downside throughout the duration of the truncated workweek thus far and since its debut as the front-month contract, notching a cumulative loss of 30.2 cents. This recent weakness is inspiring fresh buying at lows absent fundamental support, as lackluster weather-related demand expectations fuel anticipation for ongoing storage-building likely to drive stocks to near record levels.
Total working gas stocks currently sit at 2,525 Bcf, or 370 Bcf below the year-ago level and 225 Bcf above the five-year average of 2,300 Bcf, after the U.S. Energy Information Administration outlined a net 81-Bcf injection in its latest storage report for the week ended May 26.
The reported net build was above the full range of estimates coming into the day and the 80-Bcf addition seen in the corresponding week in 2016, but below the 97-Bcf five-year average injection. It included a reclassification of 4 Bcf from working gas to base gas in the Mountain region, resulting in an implied flow of 85 Bcf for the week in review.
Storage levels should continue rebuilding in the weeks ahead, with analysts estimating that only 10 Bcf/d of injections— a volume in the middle of the range of past storage injection rates— is needed through the close of the titular injection season to add 1.8 Tcf to working gas stocks that would bring total inventories near a record-high level to start the next winter heating season.
The EIA's latest "Natural Gas Weekly Update" for the week to May 31 support the steady flow of natural gas into underground storage facilities in the subsequent inventory report as it shows total U.S. gas consumption down 5% week on week at 53.5 Bcf/d but dry production up 1% at 71.3 Bcf/d.
Mid-range weather projections that show predominantly mild weather across the major demand centers spell ongoing demand weakness and larger storage builds.
The six- to 10-day outlook from the National Weather Service shows below-average temperatures enveloping the bulk of the country's eastern two-thirds, accompanied by average temperatures over portions of the central U.S. and northern Florida. Above-average temperatures are reflected for the entire West, fringes of the west-central U.S. and southern Florida.
Weather moderates in much of the country in the eight- to 14-day forecast, bringing average temperatures to parts of the West and nearly the entire central and eastern U.S. Below-average temperatures become confined to small areas of the south-central U.S. and Northwest, while above-average temperatures become contained to less but still a large section of the West, a few parts of the Midwest and southern Florida.
Returning mild weather across the central and eastern U.S. should sap lingering heating demand and stave off a ramp up in cooling demand, leaving natural gas available to move into storage facilities.
In cash trade, the price of natural gas moved for Friday flow predominantly unraveled, as moderating weather conspired with steadily declining futures.
Looking at the key hubs, a near 13-cent reduction took PG&E Gate next-day gas price activity to an index at $3.092/MMBtu, as a better-than-8-cent decrease steered benchmark Henry Hub spot gas pricing to an average at $2.967/MMBtu. An almost 7-cent retreat drove Chicago day-ahead gas price action to an index at $2.716/MMBtu, as a roughly 4-cent slump nudged Transco Zone 6 NY hub pricing to an average at $2.500/MMBtu.
Regionally, West Coast cash gas price action deflated by about 11 cents in deals averaging at $2.445/MMBtu, as Gulf Coast day-ahead gas prices faltered by around 5 cents on average to an index at $2.837/MMBtu. Midwest spot gas price activity fell by roughly 8 cents to an index at $2.653/MMBtu, as Northeast next-day gas pricing shed almost 4 cents to average at $2.456/MMBtu.
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