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June gas turns higher as fundamentals diverge

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

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


June gas turns higher as fundamentals diverge

Afternotching a scant 0.3-cent decline in the week's opening session to a settle at$2.098/MMBtu, June natural gas futures turned higher overnight ahead of theTuesday, May 10, open, as varied weather-related demand expectations combinewith what has thus far been a slow pace of storage-building that isnevertheless keeping inventories robust. The contract was lasteyed 4 cents higher at $2.138/MMBtu.

Thelatest weather projections feed anticipation of fluctuating demand, as the widescope of below-average temperatures in the near-term forecast suggests supportfor lingering heating demand that looks to be short lived, however, amidmoderating conditions in store further out.

TheNational Weather Service outlook for the six- to 10-day period showsbelow-average temperatures gripping the Northeast, Mid-Atlantic, Midwest, upperfringes of the South and portions of the Rockies, as above-average temperaturessettle over the lower tier of the South and a section of the Northwest. Averagetemperatures linger over much of the West and the midsection of the South.

Inthe eight- to 14-day forecast, below-average temperatures are reflected for amajority of the Northeast, the upper half of the Mid-Atlantic, a tiny patch ofthe Midwest and most of the West, while above-average temperatures areindicated for nearly the entire South, lower fringes of the Midwest, an area ofNew Mexico and Washington. Average temperatures are forecast for the balance ofthe country.

Mixedweather-related demand expectations feed uncertainty in the market that isbeing exacerbated by diverging supply-side fundamentals.

Aslow start to the current injection season has put the 2016 refill season wellbehind the pace of previous injection seasons, yet working gas stocks remainrobust for this time of year, the U.S. Energy Information Administrationsaid.

Followingthe net 68-Bcfaddition to stocks reported by the EIA for the week to April 29,the cumulative net inventory build thus far in the 2016 injection seasonreached 145 Bcf, versus the five-year average of 183 Bcf and the year-ago tallyof 292 Bcf.

Yetinventories stand at 2,625 Bcf, or 861 Bcf above the year-ago level and 836 Bcfabove the five-year average of 1,789 Bcf. At this level, working natural gas instorage is 40 Bcf above the previous five-year maximum for this time of year,which occurred in 2012.

Forthe next weekly storage data due out on Thursday, May 12, that will cover theweek to May 6, preliminary estimates suggest injections spanning from 52 Bcf to62 Bcf, which will compare against a 101-Bcf build during the same week in theprior year and a 79-Bcf five-year-average addition to stocks.

Atthe cash markets, the upside prevailed in price activity for natural gas movedMonday for Tuesday flow, as traders considered mixed but overall supportiveweather.

Acrossthe key hubs, the charge higher was led by Transco Zone 6 NY next-day gaspricing that leaped by almost 35 cents to an index at $1.802/MMBtu. PG&EGate and benchmark Henry Hub spot gas prices followed with a near 15-cent gainon average at indexes at $2.114/MMBtu and $2.012/MMBtu, respectively, as didChicago cash gas price action that added about 9 cents on the session toaverage at $1.960/MMBtu.

Hubgains combined to boost regional averages overall. Spot gas price activity inthe Northeast was lifted by around 7 cents in deals averaging at $1.852/MMBtu,while day-ahead gas pricing on the West Coast was bolstered by nearly 16 centsto an index at $1.769/MMBtu. Cash gas prices on the Gulf Coast rose by 15 centson average to an index at $1.880/MMBtu, as next-day gas price action in theMidwest climbed by roughly 10 cents on the day to average at $1.919/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 andnatural gasindex prices, as well as forwards and futures, visitour Commodities Pages.