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July natural gas ticks higher in technical buying ahead of storage data

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July natural gas ticks higher in technical buying ahead of storage data

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.

After ending its first day in the lead slot with a 1.8-cent loss at $2.885/MMBtu, NYMEX July natural gas futures notched gains in buying amid oversold conditions and despite fundamental pressure overnight ahead of the Thursday, May 31, open and the midmorning release of the weekly storage report. At 6:50 a.m. ET, the contract was 1.3 cents higher at $2.898/MMBtu.

Market participants anticipate a step higher in the rate of weekly inventory injections when the U.S. Energy Information Administration releases its next storage data at 10:30 a.m. ET on Thursday that will cover the week ended May 25.

Estimates for the forthcoming inventory report call for builds to stocks spanning 97 Bcf to 105 Bcf, with consensus pegged at a 100-Bcf injection. That would compare to an 80-Bcf prior-year addition and the 97-Bcf five-year average build.

Natural gas inventories sit at 1,629 Bcf, or 804 Bcf below the year-ago level and 499 Bcf below the five-year average of 2,128 Bcf, after the EIA outlined a 91-Bcf build during the week to May 18.

Additional healthy storage injections are in store, as midrange weather forecasts show milder conditions over key consuming regions that should drive a reduction in power-sector consumption of natural gas as demand for cooling abates.

In its latest projections, the National Weather Service sees average to below-average temperatures stretching from the East Coast into the upper fringes of the Midwest and portions of the Northwest in the upcoming six- to 10-day period, then receding from parts of the western U.S. but overtaking a majority of the eastern half of the U.S. further out to the eight- to 14-day period. Above-average temperatures settle elsewhere in the country.

Helping feed the possibility for a continuation of the healthy pace of storage rebuilding going forward, a steadily rising rig count spells an impending boost to production that should leave more natural gas available to flow into underground stocks. Baker Hughes' weekly U.S. gas and oil rig count data outlined an increase of 13 rigs in the week to May 25 to 1,059.

Cash gas prices varied Wednesday on the back of diverging demand forecasts.

Looking at the key hubs, an almost 4-cent gain brought Chicago day-ahead gas price action to an index at $2.657/MMBtu, as an approximately 1-cent uptick nudged PG&E Gate spot gas pricing to an average at $3.018/MMBtu. Transco Zone 6 NY hub activity was unchanged day on day at an index at $2.800/MMBtu, while benchmark Henry Hub next-day gas pricing was off about 1 cent at an average at $2.831/MMBtu.

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Regionally, Midwest cash gas pricing logged a roughly 1-cent uptick in deals averaging at $2.484/MMBtu, as West Coast day-ahead gas price activity unraveled around 5 cents on the day to average at $1.996/MMBtu. Northeast spot gas price action faltered by near 7 cents to an index at $2.463/MMBtu, as Gulf Coast next-day gas prices advanced by about 1 cent on average to an index at $2.782/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.