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June natural gas sheds more value overnight amid fundamental weakness

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June natural gas sheds more value overnight amid fundamental weakness

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.

Following a 0.6-cent slump to close at $2.836/MMBtu in the prior session, NYMEX June natural gas futures extended lower overnight ahead of the Wednesday, May 16, open, as warmer weather and robust production are keeping inventories on track to a healthy level ahead of the next major demand period. At 6:40 a.m. ET (1040 GMT) the contract was 1.8 cents lower at $2.818/MMBtu.

According to the American Gas Association's latest "Natural Gas Market Indicators" report, injections of about 12 Bcf/d on average would be needed for working gas inventories to reach above 3.5 Tcf by early November. "Based on the past week's report we are right on that pathway," the agency said.

Total working gas stocks built by 89 Bcf during the most recent storage report week ended May 4, exceeding both the 75-Bcf five-year-average addition and the 49-Bcf prior-year build. Natural gas inventories currently sit at 1,432 Bcf, or 863 Bcf below the year-ago level and 520 Bcf below the five-year average of 1,952 Bcf.

Recent and anticipated warm weather looks to encourage additional large builds to storage, as an early uptick in cooling demand meets a sharp decline in heating demand.

During the week ended May 9, warmer weather triggered a 14% increase in power burn week on week but also a 37% drop in residential/commercial-sector demand, according to the EIA's latest "Natural Gas Weekly Update." Total U.S. gas consumption was down 4% on the week. Dry production was flat on the week.

Warmer weather is in store further out, as the latest National Weather Service projections for both the six- to 10-day and eight- to 14-day periods continue to reflect above-average temperatures across nearly the entire country.

A steadily rising rig count that implies an impending production growth should leave more natural gas available to flow into underground storage facilities.

Day-ahead natural gas prices had a strong showing in much of the country Tuesday.

Among the key hubs, Chicago next-day natural gas prices led the charge higher with an almost 9-cent advance on average to an index at $2.616/MMBtu. Transco Zone 6 NY cash gas pricing followed with an approximately 2-cent increase in deals averaging at $2.489/MMBtu, then PG&E Gate hub action that picked up about 1 cent on the day to average $2.921/MMBtu. Bucking the wider uptrend, benchmark Henry Hub spot gas price activity slumped by roughly 1 cent to an index at $2.830/MMBtu.

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In regional terms, Midwest day-ahead gas price action notched a near 10-cent gain in trades averaging at $2.567/MMBtu, while Northeast and Gulf Coast spot gas prices rose by about 3 cents on average to indexes at $2.380/MMBtu and $2.764/MMBtu, respectively. West Coast cash gas price activity was lifted by almost 7 cents to an index at $1.812/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.