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June natural gas ends higher as production concerns offer support

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 natural gas ends higher as production concerns offer support

Aday of sharp losses in the week's opening session gave way to a modest reversalTuesday, May 3, with the contract settling the session at $2.086/MMBtu, higherby 4.4 cents.

Themarket is searching for a comfortable level with production concernsundermining steeper losses signaled by otherwise weak fundamental support.

Marketconcerns surround the limited number of drilling rigs operating in the U.S. andthe production decline that is expected as the weak pricing environmentprovides no real impetus to continue to produce.

Still,production data fromthe U.S. Energy Information Administration released April 29 shows grossnatural gas production in the U.S. accelerated its push higher in February,supported by rising output from Pennsylvania and Ohio, as well as Texas and NewMexico.

Grossgas output edged 1.0%, or 0.95 Bcf/d, higher to 92.02 Bcf/d in February from91.07 Bcf/d in January, as a month-on-month drop in most states was offset byhigher production in states covering the Marcellus and Utica formations, aswell as in Texas and New Mexico, the EIA said in its latest "Monthly CrudeOil and Natural Gas Production" report.

Asthe market eyes natural gas production for signs of decline, demand erosion issuggested as weather maps offer outlooks for conditions through the upcoming14-day period that should generate limited heating or cooling demand. The six-to 10-day map from the National Oceanic and Atmospheric Administration showsabove-average temperatures along the Eastern Seaboard and further inland inportions of the Mid-Atlantic and Southeast. Above-average temperatures willalso engulf the West. Portions of the East as well as the central U.S. willexperience average temperatures, while a patch of below-average temperaturesrests over a portion of the Northeast and north-central U.S. and another patchwill engulf an area in the south-central U.S.

SNL Image

Theeight- to 14-day projection is similar with the most prevalent change being inthe areas of below-average temperatures that shrink to encompass smallerportions of the same areas outlined in the previous period.

SNL Image

Asweather moderates and demand is erased, natural gas inventories are expected toaccelerate the building process through the balance of the injection season.

Abuild of 73 Bcf in the week to April 22 was better than market expectations anddespite the build's comparison below the 84-Bcf injection reported for the sameweek in 2015, the injection was better than the five-year average injection of52 Bcf and brought total U.S. working gas supply to 2,557 Bcf, some 870 Bcfabove the year-ago level and 832 Bcf above the five-year average storage levelof 1,725 Bcf.

Thisweek, early views from analysts and traders suggest builds ranged from 56 Bcfto 75 Bcf for the week to April 29, when some cooler weather resurfaced in keyheating regions to undermine natural gas storage building.

Inday-ahead trade, Northeast markets were beginning to ease after days of sharpgains supported by cooler weather and supply concerns surrounding the explosionon the Texas Eastern pipeline in western Pennsylvania.

TETCO-M3added a more marginal 10 cents on the day, compared with a gain of about 25cents in the previous session, to find an index below $1.75, while the marketat Transco Zone 6 NY was lower by more than 1 cent to an index below 1.90.

Tradingat the benchmark Henry Hub was about 1 cent higher on the session to an indexatop $1.90 as weather supported gains. Waha deals were higher with heat acrossTexas supporting early cooling load. Deals were nearly 10 cents higher thereand averaged near $1.90. Conversely, cool weather in Chicago supported a near10-cent gain there, to an index around $2.05. Across the West, markets werehigher as well. SoCal Border added about 10 cents on the session to an indexnear $1.95, while PG&E Gate was up about 5 cents on average to an indexnear $2.05/MMBtu.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including our power,naturalgas and coalindex prices, as well as forwardsand futures,visit our Commodities Pages. To view detailed EIA Weekly Natural Gas Storagedata, go to our Natural GasStorage Page.