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Natural gas price gains supported as weather threatens rate of storage building

Editor's Note: Please be advised that S&P Global Market Intelligence will no longer publish daily articles on price trends in the U.S. natural gas, electricity and emissions markets beginning June 1, 2018. Pricing data for these energy markets will continue to be available on the Market Intelligence platform.

Trading ahead of options expiration at the close of business May 26 and the June contract's roll off the board on the return from the Memorial Day weekend May 29, the front-month June natural gas contract added value Thursday, May 24, as inventory building efforts showed signs of slowing on early cooling demand.

June futures settled 2.6 cents higher at $2.940/MMBtu while July futures, which will soon move into the lead position, gained 1.6 cents to settle at $2.971/MMBtu.

The U.S. Energy Information Administration reported a net 91-Bcf injection into natural gas inventories in the Lower 48 during the week ended May 18 that was just above consensus estimates that called for a 90-Bcf build, and was above respective year-ago and five-year average injections of 74 Bcf and 89 Bcf.

It was the injection's downside miss against the prior week's more impressive 106-Bcf build that drove gains, even as the total working gas supply rose to 1,629 Bcf, and deficits to the year-ago and year-on-five-year-average shrunk to 804 Bcf and 499 Bcf, respectively.

Feeding market woes, weather that has supported an early bump higher in cooling demand accelerating overall consumption of natural gas and limiting the amount of natural gas available to move into storage looks to remain supportive going forward.

Midrange National Weather Service projections for both the six- to 10-day and eight- to 14-day periods continue to show above-average temperatures engulfing nearly the entire country, which should keep cooling load elevated in the coming weeks.

Also in weather, ahead of the official June 1 start to hurricane season, the National Hurricane Center is tracking a broad surface low drifting slowly northward over the eastern Yucatan Peninsula that continues to become better defined, the agency said at 1:20 p.m. ET May 24.

Although showers and thunderstorms, along with strong gusty winds, remain primarily over the adjacent waters of the northwestern Caribbean Sea, environmental conditions are forecast to become more conducive for development through early next week, and a subtropical or tropical depression is likely to form by late Saturday over the southeastern Gulf of Mexico, the NHC said. The center gave the system a 70% chance of formation through the 48-hour period and a 90% chance of formation over the next five days.

Any threat to U.S. natural gas production is a concern for the market amid the still substantial inventory deficits. Still, land rig gains that remain away from any threat to offshore production, offers downside pressure.

The Baker Hughes weekly rig count report showed a gain of one rig in the week to May 18 to 1,046 rigs. The total count sits 145 rigs above the corresponding week a year earlier. Baker Hughes will update the rig count at around 1 p.m. on May 25.

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, natural gas index prices, as well as forwards and futures, visit our Commodities Pages.