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June natural gas takes upward bias ahead of week's opener

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.

June natural gas took an upward bias overnight ahead of the Monday, May 14, open, as building heat across major portions of the country spells rising cooling demand that could threaten the pace of storage building as power sector-consumption climbs. At 7:15 a.m. ET (1115 GMT) the contract was 1.5 cents higher at $2.821/MMBtu while trading a tight range from $2.810/MMBtu to $2.830/MMBtu.

The latest revisions to weather maps by the National Weather Service show above-average temperatures engulfing the majority of the Eastern and Western U.S. in the six- to 10-day period, leaving normal temperatures across portions of the central and Southwest and below-average temperatures confined to an area of southern California and Arizona in the West, and Nebraska and small portions of its surrounding states in the center of the country.

Above-average temperatures overtake all but small areas of the Northeast and north central U.S. in the eight- to 14-day period.

The U.S. Energy Information Administration said increased temperatures in the week to May 9 supported natural gas consumption for power generation up 14% week over week, with the largest increase in natural gas use for electric power generation coming from the southeast.

Weather supports outlooks for a continued boost to power-sector consumption and a slower rate of storage building, even amid the destruction of heating demand reflected in the 37% combined decline in residential and commercial-sector consumption because of warmer weather, the EIA said.

Natural gas inventories are climbing after a three-week delay to the injection season. Following a net 62-Bcf injection in the week to April 27, which marked the first build of the season, the natural gas supply was up a net 89 Bcf in the week to May 4 to a total at 1,432 Bcf.

Still, inventories stand 863 Bcf below the year-ago level and 520 Bcf below the five-year average storage level of 1,952 Bcf, with the deficits and the early arrival of unseasonably warm weather keeping upside support in the market.

However, the rising rig count offers some downside pressure as it suggests that natural gas production will remain robust. The combined oil and natural gas rig count in the United States was up 13 in the week to May 11 to 1,045, according to the latest North American Rotary Rig Count. The total count sits 160 rigs above the corresponding week a year earlier.

In day-ahead trade ahead of the weekend, production moved for Monday delivery traded mostly lower.

At the key hubs, Transco Zone 6 NY deals were 6.3 cents lower on average to an index at $2.487/MMBtu, Chicago traded 6.0 cents lower to $2.367/MMBtu, PG&E Gate moved 4.3 cents lower to $2.703/MMBtu and the Henry Hub shed 3.0 cents to an index at $2.750/MMBtu.

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Regionally, while the Gulf Coast saw a 1.7-cent gain to an index at $2.666/MMBtu, elsewhere combined hub activity equated to losses led by the West, where a decline of 10.2 cents drove the index to $1.614/MMBtu. The Midcontinent saw a 4.5-cent loss to an index at $2.338/MMBtu, while the Northeast shed 2.4 cents to an index at $2.220/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, natural gas index prices, as well as forwards and futures, visit our Commodities Pages.