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In This List

September gas retreats amid bearish fundamentals

Essential Energy Insights - September, 2020

Bull market leaves US utilities behind in August

Rate case activity slips, COVID-19 proceedings remain at the forefront in August

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September gas retreats amid bearish fundamentals

After advancing by 2.5 cents in the prior session to settle at $2.819/MMBtu, NYMEX September natural gas futures slumped overnight ahead of the Wednesday, Aug. 2, open, as the market succumbed anew to fundamental pressure. At 6:50 a.m. ET, the contract was 1.0 cent lower at $2.809/MMBtu.

Milder to cooler weather continues to dominate mid-range forecasts, suggesting diminished power-sector consumption of natural gas as customer demand for cooling is trimmed.

The National Weather Service sees below-average temperatures stretching from the bulk of the Rockies into nearly the entire central U.S. and portions of the East in the upcoming six- to 10-day period, before receding from a few areas of the Rockies but overtaking a larger area of the East Coast further out to the eight- to 14-day period. Average temperatures settle over a slim band in the Rockies, the entire Northeast, parts of the Mid-Atlantic and a narrow section of the South in the shorter-range view, but shift in scope in the Rockies and shrink in the East to give way to colder weather in the longer-range period.

Above-average temperatures are projected to be contained to the remainder of the West, fringes of the Southeast and the southern tip of Texas throughout both periods.

Waning cooling demand should leave more natural gas unutilized and available to be squirreled away into underground storage facilities, encouraging an acceleration in the rate of weekly inventory builds.

Storage injections throughout much of the refill season thus far have trailed historical averages, with the latest inventory data from the U.S. Energy Information Administration seen continuing this trend as it outlined a surprisingly modest 17-Bcf build for the week to July 21 that was below both the 47-Bcf five-year average injection and a 20-Bcf addition in the same week in 2016. It took total working gas stocks to 2,990 Bcf, or 302 Bcf below the year-ago level and 111 Bcf above the five-year average of 2,879 Bcf.

Lackluster weather-related demand implied by outlooks should allow for larger builds to stocks that would fuel the possibility for robust end-of-season inventories near 4.0 Tcf.

Likely to limit price erosion, however, coal-to-gas switching could come into play as the price of natural gas declines to provide some demand support.

In cash trade, price action for day-ahead natural gas predominantly favored the downside Tuesday amid the combined pressure of milder weather and mostly softer demand expectations.

Among the key delivery locations, the charge lower was led by benchmark Henry Hub spot gas price activity that shed about 12 cents on the session to average at $2.749/MMBtu. Chicago next-day gas pricing followed with a near 8-cent decline to an index at $2.717/MMBtu, then PG&E Gate hub prices that slumped by roughly 5 cents on average to an index at $3.199/MMBtu. Bucking the wider retreat, Transco Zone 6 NY cash gas price action logged an almost 1-cent uptick in deals averaging at $2.691/MMBtu.

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Regional indexes were weaker overall. Day-ahead gas pricing on the Gulf Coast deflated by 6 cents to an index at $2.676/MMBtu, as cash gas price activity in the Midwest unraveled around 5 cents to average at $2.606/MMBtu. Next-day gas price action in the West notched a near 4-cent reduction in trades averaging at $2.526/MMBtu, as spot gas prices in the Northeast eased by roughly 1 cent on average to an index at $2.437/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.