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September gas futures climb as market eyes impending heat

After settling 0.2 cent lower at $2.983/MMBtu ahead of the weekend, NYMEX September natural gas futures advanced in overnight trading leading up to the Monday, Aug. 14, open, as warmer weather in store looked to boost cooling load and keep a lid on the rate of weekly storage builds in the weeks ahead. At 7 a.m. ET (1100 GMT), the contract was 2.0 cent higher at $3.003/MMBtu.

Revised National Weather Service outlooks show above-average temperatures stretching over a majority of the country's eastern two-thirds into much of the Southwest and portions of Oregon through both the six- to 10-day and eight- to 14-day periods, leaving average to below-average temperatures contained to the balance of the West and the central U.S.

Heat forecast for the major cooling east and central regions should drive up power-sector demand for natural gas, as utilities are called upon to meet customer cooling load, likely limiting the amount of natural gas available to store away for the winter peak heating season.

Warmer weather throughout much of the contiguous U.S. that bolstered natural gas demand for cooling is already seen to have extended the slower-than-normal pace of inventory-building into the latest storage report week ended Aug. 4, for which the U.S. Energy Information Administration outlined a 28-Bcf injection.

The reported storage build bested the 24-Bcf injection in the prior year but trailed the 54-Bcf five-year-average addition, marking the fifth consecutive week that the weekly injection was lower than the norm, the EIA said in its latest "Natural Gas Weekly Update."

The week's data brought net storage injections thus far in the refill season to 987 Bcf, versus the five-year average of 1,191 Bcf over the same period. Total working gas stocks currently sit at 3,038 Bcf, or 275 Bcf below the year-ago level and 61 Bcf above the five-year average of 2,977 Bcf.

Early estimates call for an end-of-October inventory atop 3,900 Bcf, but a subdued rate of weekly injections could threaten expectations for robust stocks to start the heating season.

Meanwhile, the National Hurricane Center is currently monitoring two weather disturbances in the Atlantic, serving as a reminder that hurricane season is in full swing.

Tropical Storm Gert was last located at 5 p.m. ET on Sunday at about 505 miles west-southwest of Bermuda, packing maximum sustained winds of 40 mph as it moves toward the north-northwest at 10 mph. A turn toward the north-northeast is anticipated by Monday night, with slow strengthening seen over the next day or two.

An area of disturbed weather to the south and southwest of the Cabo Verde Islands associated with a broad trough of low pressure and a tropical wave was also seen at 8 p.m. ET on Sunday. The systems are projected to merge over the next day or two, with environmental conditions expected to be conducive for development later in the week as the disturbance moves westward at about 15 mph. It is given a 10% chance of formation over the next 48 hours and a 40% chance over the next five days.

At the cash hubs, the natural gas offering booked on Aug. 11 that was revised for Saturday-through-Monday flow notched both gains and losses, as traders considered changes to weather and demand expectations through and coming off the weekend.

Looking at the key delivery locations, near 5-cent gains on average took benchmark Henry Hub and Chicago day-ahead gas prices to indexes at $2.957/MMBtu and $2.861/MMBtu, respectively, as an almost 3-cent uptick nudged PG&E Gate hub action to an index at $3.303/MMBtu. In contrast, a 22-cent decline steered Transco Zone 6 NY spot gas price activity to an index at $1.780/MMBtu.

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Regionally, Gulf Coast next-day gas pricing notched a roughly 4-cent increase in deals averaging at $2.844/MMBtu, as Midwest spot gas price action tacked on around 3 cents to average at $2.750/MMBtu. Conversely, West Coast cash gas price activity slumped by 2 cents to an index at $2.551/MMBtu, as Northeast day-ahead gas prices fell by almost 7 cents on average to an index at $2.095/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 and natural gas index prices, as well as forwards and futures, visit our Commodities Pages.