Editor's Note:
Ahead of options expiration at the close of business Friday, May 25, June natural gas futures moved on both sides of the ledger in search of definitive direction amid a variety of driving factors. The contract settled 0.1 cent lower at $2.939/MMBtu while trading a range from $2.912/MMBtu to $2.964/MMBtu.
July futures, which will take the lead following the June contract's expiration at the close of May 29 trade, the first day of trade following the Memorial Day holiday, finished the Friday session 0.8 cent lower at $2.963/MMBtu.
The inventory rebuilding process is underway, providing downside momentum for the market, while any threats to weekly injections offer upside support.
In the week to May 11 the natural gas supply climbed 106 Bcf, which was better than expectations and better than historical averages. On the heels of the injection, in the week to May 18, the U.S. Energy Information Administration reported a build of just 91 Bcf.
Although beating the 90-Bcf injection expected ahead of the report's release, as well as the 74-Bcf year-ago build and the 89-Bcf five-year average injection, the step down in the rate of storage building sparked market woes as weather forecasts imply strong demand going forward.
Revised National Weather Service outlooks show above-average temperatures spanning the bulk of the U.S. in the six- to 10-day period and the entire country in the eight- to 14-day period. Average temperatures will initially encompass portions of the West Coast but will eventually disappear from the forecast, while below-average temperatures do not appear in the projections at all.
Also supportive, ahead of the official June 1 start of the hurricane season, the National Hurricane Center is tracking subtropical storm Alberto, situated just east of the Yucatan Peninsula of Mexico, the agency said at 12:05 p.m. ET on May 25. Tropical cyclone formation is not expected during the next five days, the agency said.
As storage deficits to historical averages remain substantial, with the working gas supply currently at 1,629 Bcf, or 804 Bcf below the year-ago level and 499 Bcf below the five-year average storage level of 2,128 Bcf, any threat to U.S. natural gas production poses a concern for the market.
Allaying worries, however, land rigs that remain away from any threat to offshore production have been on a steady uptrend to ultimately signal an impending boost to production levels. Baker Hughes' weekly rotary rig count data outlined an increase of 13 oil rigs in the week to May 25 to a total U.S. gas and oil rig count of 1,059, which includes 1,036 operating onshore.
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.
