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Natural gas futures end higher with weather seen supporting demand

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Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

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


Natural gas futures end higher with weather seen supporting demand

Junenatural gas futures were higher Tuesday, May 10, as supportive weather outlooksdrove a test of the upside. Reaching a $2.173/MMBtu intraday high, the contractsettled the session with a 6-cent gain at $2.158/MMBtu.

Attemptingto push through key resistance points,the contract was deriving its support from weather forecasts that look to offera mix of cooling and heating demand that should keep natural gas inventories buildingat a slow pace.

The six-to 10-day weather map from the National Oceanic and Atmospheric Administration showsbelow-average temperatures engulfing much of the eastern U.S. and the majority ofthe central U.S. Average temperatures will span across a portion of the Southeastinto a portion of the Gulf before moving up into portions of the west-central U.S.,the Rockies and the majority of the West. Areas in the Southeast and Gulf will bejoined by an area of the Northwest under above-average temperatures.

In theeight- to 14-day period the NOAA anticipates average temperatures in the Northeastand Mid-Atlantic, as well as in portions of the Southeast, west-central and Northwest.Above-average temperature will dominate in the Southeast and central U.S., whilegripping a small portion of Washington State. Below-average temperatures are forecastto hold over the majority of the West.

"Today'sforecast looks somewhat cooler in the 6-10 day period and somewhat warmer 11-15days out, which would often be seen as offsetting changes. However, as it happensit looks like population weighted degree day accumulations suggest marginally strongerdemand for both periods, with somewhat higher late season heating demand in theMidwest and Northeast next week, and stronger cooling demand thereafter," CitiFutures analyst Tim Evans said.

Marketparticipants may also be turning attention to this week's natural gas inventoryreport that will cover the review week to May 6. Traders and analysts surveyed anticipatea build to stocks ranged from 52 Bcf to 62 Bcf that will compare against a 101-Bcfinjection during the same week last year and a 79-Bcf five-year-average injection.

The naturalgas inventory currently sits at 2,625 Bcf, some 861 Bcf above the year-ago leveland 836 Bcf above the five-year average storage level of 1,789 Bcf after the U.S.Energy Information Administration reported a net 68-Bcf injection into natural gasinventories in the Lower 48 during the week ended April 29 that was slightly betterthan market expectations.

Cumulativeinjections into working gas total 145 Bcf thus far in the 2016 refill season, comparedwith the five-year average of 183 Bcf and last year's tally of 292 Bcf during thesame period. Despite the slow rise, the EIA saidin its latest Short-term Energy Outlook that natural gas inventories should beginthe winter heating season at 4,158 Bcf, the highest level on record to begin theheating season.

In spotgas trade, after rising sharply in the previous session, Northeast next-day gasvalues softened at most major delivery locations, while elsewhere in the country,supportive weather and demand drove additional gains.

Movinglower, Transco Zone 6 NY deals tumbled more than 10 cents to an index near $1.60and Tetco-M3 gave back about 10 cents to an index near $1.50. Driven higher, HenryHub added about 10 cents to an index near $2.05, Waha gained about 5 cents to anaverage near $1.95, Chicago gained more than 5 cents to an average atop $2.00 andCIG mustered a near 5-cent gain to an index atop $1.85. In the West, SoCal Bordertrades were higher by less than 1 cent and PG&E Gate added less than 5 centsto indexes around $1.95 and $2.15 respectively.

Market prices and included industrydata are current as of the time of publication and are subject to change. For moredetailed market data, including our power,naturalgas and coalindex prices, as well as forwardsand futures,visit our Commodities Pages. To view detailed EIA Weekly Natural Gas Storage data,go to our NaturalGas Storage Page.