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August gas futures weighed down overnight by hefty inventories

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Essential Energy Insights - February 2021

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Six trends shaping the industries and sectors we cover in 2021

Six trends shaping the industries and sectors we cover in 2021


August gas futures weighed down overnight by hefty inventories

Afterclawing 0.6 cent higher to a close at $2.728/MMBtu in the prior session, Augustnatural gas futures lost footing overnight ahead of the Wednesday, July 20,open, as the market succumbed anew as total inventories remain robust and ontrack toward a record-high end-of-season level. At last glance,the August front-month contract was trading 2.0 cents lower at $2.708/MMBtu.

Duelingfundamentals that argue for hotter weather ahead that should ramp up demand andextend the streak of underperforming storage builds, but also for hefty stocklevels at the close of the injection season continue to drive seesaw activityat the futures complex.

RevisedNational Weather Service outlooks show above-average temperatures blanketingthe bulk of the U.S. with the exception of the Midwest in the six- to 10-dayperiod, before expanding in scope to envelop the entire country further out tothe eight- to 14-day period.

Impendingheat suggests stronger cooling demand that should drive natural gas away fromstorage facilities and toward the electric-power sector as utilities look tonatural gas-fired generators to meet air-conditioning load, thereby keeping alid on subsequent stock injections through the refill season.

Thepattern of below-average storage builds that has dominated the injection seasonthus far remained intact during the week to July 8, as the latest inventorydata released by the U.S. Energy Information Administration for this reviewperiod outlined a 64-Bcfaddition to stocks that compared against a 95-Bcf injection seen inthe corresponding week in 2015 and a 77-Bcf five-year average build.

Thereported storage injection took total inventories to 3,243 Bcf, or 507 Bcfabove the year-ago level and 586 Bcf above the five-year average of 2,657 Bcf.

Marketparticipants anticipate another modest build to stocks when the next weeklystorage data that will cover the week to July 15 is released on Thursday, July21, with estimates calling for an injection ranging from 35 Bcf to 40 Bcf,which would compare against the 61-Bcf five-year-average build and the 70-Bcfinjection in the same week in 2015.

Althoughthe pace of storage-building has been lackluster compared to historical averages,weekly injections to stocks nevertheless continue to improve overallinventories and keep storage on a path to reach a hefty level to close theseason.

Inits latest "Short-termEnergy Outlook," the EIA projected total gas stocks wouldreach a record-high of 4,022 Bcf at the end of October, even withsmaller-than-average injections to storage.

Incash trading, price action for day-ahead natural gas delivery was choppyTuesday, as diverging demand projections combined with the recent sidewaysactivity at the futures complex.

Lookingat the major hubs, losses of more than 5 cents on average were seen drivingTransco Zone 6 NY and Chicago spot gas prices to indexes at $1.950/MMBtu and$2.773/MMBtu, respectively. Conversely, a near 2-cent increase steered PG&EGate next-day gas price action to an index at $3.042/MMBtu, as aless-than-1-cent gain took benchmark Henry Hub cash gas pricing to an index at$2.829/MMBtu.

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On aregional basis, Northeast day-ahead gas price activity was unchanged day on dayat an index at $2.220/MMBtu, while Midwest next-day gas pricing was off alittle more than 1 cent on the session in transactions averaging at$2.701/MMBtu. West Coast cash gas price action unraveled less than 1 cent intrading to average at $2.603/MMBtu, as Gulf Coast spot gas prices logged a near1-cent uptick on average at an index at $2.703/MMBtu.

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Market prices and included industry data are currentas of the time of publication and are subject to change. For more detailedmarket data, including power andnatural gasindex prices, as well as forwards and futures, visitour Commodities Pages.