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June natural gas tumbles into expiration amid overbought conditions

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June natural gas tumbles into expiration amid overbought conditions

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.

June natural gas futures traded in mostly negative territory in its final day as the lead contract Tuesday, May 29. Weighed down by weather outlooks that show below-average temperatures in major cooling markets, the contract moved in a $2.838/MMBtu to $2.968/MMBtu trading range and settled 6.4 cents lower at $2.875/MMBtu.

July futures followed the June contract's retreat as it sets up to take the lead position on the defensive. Trading from $2.864/MMBtu to $3.00/MMBtu, July futures settled Tuesday 6.0 cents lower at $2.903/MMBtu.

The latest updates to the six- to 10-day and eight- to 14-day weather forecasts from the National Weather Service show average and below-average temperatures gripping portions of the East Coast and the West in the shorter-range view and the Eastern Seaboard, a few areas of the Midwest and Montana in the extended period. Above-average temperatures dominate in both outlooks.

Milder weather in key consuming regions despite the heat elsewhere in the country should limit demand for cooling and allow natural gas inventories to build at a healthy pace in the weeks ahead.

Efforts to rebuild storage took a step back following the season's first triple-digit injection of 106 Bcf in the week ended May 11, when the U.S. Energy Information Administration reported a 91-Bcf addition in the most recent inventory report week ended May 18.

Total working gas stocks currently sit at 1,629 Bcf, still 804 Bcf below the year-ago level and 499 Bcf below the five-year average of 2,128 Bcf.

Although the intermediate-term outlook for the market is bullish because of concerns over the current supply deficit carrying over into the summer cooling season, the market was set up for a short-term correction amid overbought conditions, FX Empire analyst James Hyerczyk said May 29.

Market fears surrounding the supply and demand balance are also being quelled by a steady uptrend in land rigs that signal impending production growth. Baker Hughes' weekly rotary rig count data outlined an increase of 13 rigs in the week to May 25 to a total U.S. gas and oil rig count of 1,059, which includes 1,036 operating onshore.

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.