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August gas futures extend gains with supportive fundamentals

Followinga 3.2-cent advance toa finish at $2.734/MMBtu in the prior session, August natural gas futuresextended gains overnight ahead of the Wednesday, July 13, open, as supportiveweather-driven demand and storage expectations in the near-term run counter tobearish end-of-season inventory prospects. Holding near unchangedfor much of the overnight session, the front-month found some footing andturned to the upside, trading last 5 cents higher at $2.784/MMBtu.

Forecastsfrom the National Weather Service reflecting above-average temperatures acrossnearly the entire U.S. in the six- to 10-day and eight- to 14-day periods spellincreased cooling load in the coming weeks that should ramp up natural gasdemand from the power sector as utilities work to meet air-conditioning load.

Increasedpower-sector reliance on natural gas-fired generation would divert natural gasaway from storage facilities, keeping a lid on the amount of natural gasavailable to flow into storage and allowing for additions to the string ofbelow-average weekly builds to stocks that has dominated the injection seasonthus far.

Thelackluster pace of inventory-building remained intact during the latest storagereport week ended July 1, for which the U.S. Energy Information Administrationoutlined a 39-Bcfinjection that compared against an 83-Bcf build in thecorresponding week last year and a 77-Bcf five-year-average addition to stocks.The reported injection took overall inventories to 3,179 Bcf, trimming theyear-on-year overhang to 538 Bcf and shrinking the year-on-five-year-averagesurplus to 599 Bcf.

Forthe next weekly inventory data due out from the EIA at 10:30 a.m. ET onThursday, that will cover the week to July 8, market participants anticipate animprovement to stocks larger than in the prior week but still below historicalaverages. Estimates for the forthcoming storage data suggest an injection from46 Bcf to 55 Bcf, with consensus formed at a 50-Bcf build, which would compareagainst a 77-Bcf five-year-average build and a 95-Bcf injection reported in thesame week in 2015. But while shrinking inventory overhangs feedupside momentum for futures, still-impressive overall stock levels seen to remainon a path toward an end-of-season record high of 4,022 Bcf, according to thelatest EIA forecast,cast a shadow over the market's attempts at recovery.

Atthe cash markets, the price of natural gas booked for Wednesday flow had amixed but predominantly weak showing.

Acrossthe major hubs, a near 11-cent decline was seen driving benchmark Henry Hubday-ahead gas price action to an index at $2.770/MMBtu, as a downdraft of about6 cents took Chicago spot gas pricing to an average at $2.716/MMBtu and areduction of almost 1 cent steered PG&E Gate cash gas price activity to anindex at $2.932/MMBtu. Running against the wider retreat, a near 1-cent advancebrought Transco Zone 6 NY hub pricing to an average at $1.980/MMBtu.

Inregional terms, Gulf Coast cash gas prices fell by 7 cents on average to anindex at $2.635/MMBtu, as Midwest next-day gas price activity notched a near6-cent decrease in transactions averaging at $2.621/MMBtu. West Coast day-aheadgas pricing shed about 8 cents on the session to average at $2.506/MMBtu, asNortheast spot gas prices rose by almost 3 cents against the broad downtrend toan index at $2.305/MMBtu.

Marketprices and included industry data are current as of the time of publication andare subject to change. For more detailed market data, including power and natural gas indexprices, as well as forwards and futures, visitour Commodities Pages.