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June natural gas unwinds amid anticipation of larger storage build

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 the prior session with a modest 0.5-cent gain at $2.737/MMBtu, NYMEX June natural gas futures lost footing overnight ahead of the Thursday, May 10, open and the midmorning release of the weekly storage data that is poised to show an accelerated pace of inventory building. At 6:45 a.m. ET, the contract was 1.7 cents lower at $2.720/MMBtu.

Warmer weather that helped sap demand for natural gas of late is seen to have allowed for more natural gas to flow into underground storage facilities when the U.S. Energy Information Administration releases its next storage report at 10:30 a.m. ET on Thursday.

Forecasts for the forthcoming inventory data that will cover the week ended May 4 call for an injection to stocks of anywhere from 75 Bcf to 96 Bcf, with consensus formed at an 89-Bcf build. Within the range of estimates, the week's data would be at equal footing or above the 75-Bcf five-year-average addition and the 49-Bcf prior-year build.

The injection season got off to a late start, when three weeks into April the EIA reported the first build of the season, a 62-Bcf injection for the week ended April 27 that brought total working gas stocks to 1,343 Bcf, or 903 Bcf below the year-ago level and 534 Bcf below the five-year average of 1,877 Bcf.

Predominantly warmer weather in the midrange that suggests additional demand destruction, combined with a steadily rising rig count that implies production growth, will feed potential for a further improvement in the rate of storage builds going forward.

Revised National Weather Service projections show above-average temperatures remaining dominant across the country through both the six- to 10-day and eight- to 14-day periods, even as the scope of average temperatures expands from small patches of the Southwest and Midwest in the near term to a few more areas of both regions further out. Below-average temperatures initially appear over a portion of California but disappear in the outlook for the extended period.

Next-day natural gas values were mixed with a dominant downside bias Wednesday.

Looking at the key delivery locations, an approximate 4-cent reduction took PG&E Gate spot gas price activity to an index at $2.775/MMBtu, as a 2-cent slump nudged benchmark Henry Hub cash gas pricing to an average at $2.747/MMBtu. By contrast, an almost 15-cent increase drove Transco Zone 6 NY day-ahead gas price action to an average at $2.679/MMBtu, as a roughly 3-cent gain brought Chicago hub action to an index at $2.416/MMBtu.

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Regional averages unraveled overall. West Coast next-day gas pricing notched a near 9-cent decline in deals averaging at $1.744/MMBtu, as Gulf Coast spot gas price activity shed less than 1 cent on the day to average at $2.640/MMBtu. Northeast cash gas prices slipped by about 4 cents on average to an index at $2.268/MMBtu, as Midwest day-ahead gas price action faltered by around 1 cent to an index at $2.388/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.