July natural gas futures put in a whipsaw session Monday, June 12, lacking support for sharp moves either higher or lower. Early gains gave way to modest losses as the front-month contract moved between $3.010/MMBtu and $3.087/MMBtu, before settling 1.5 cents lower on the session at $3.024/MMBtu.
A natural gas inventory of 2,631 Bcf, 332 Bcf below the year-ago level, is also 237 Bcf above the five-year average storage level of 2,394 Bcf and is helping to keep the price of natural gas tethered to the downside.
The inventory is currently considered healthy, while forecasts for additional storage builds through the remainder of the injection season are feeding expectations for an end-of-injection season inventory near record highs.
However, weather outlooks suggest a possible slowdown in the rate of storage building in the next few weeks, as heat moved into the eastern U.S. in the week to June 9, and a heatwave expected across the majority of the country in the upcoming six- to 10-day period is expected to boost cooling demand and thus increase power-sector consumption of natural gas to fuel power generators.
The U.S. Energy Information Administration surprised the market with a report of a 106-Bcf injection into stocks for the week to June 2 that was above the consensus estimate formed at 98 Bcf and was above both the 68-Bcf injection reported for the same week in 2016 and the five-year average injection of 94 Bcf.
Mild weather in the eastern U.S. tempered power-sector consumption, while the week's expanse over the Memorial Day holiday limited commercial and industrial sector demand and left more natural gas available to put into storage during the review week. But warmer weather during the week to June 9 is expected to have boosted demand and limited the amount of natural gas available to store away for the winter heating season.
Further, heat is forecast to build across the majority of the country in the upcoming six- to 10-day period and further limit storage builds.
The National Weather Service outlines above-average temperatures across the majority of the country in the six- to 10-day period, with only a small portion on the Northeast coastline, a tiny portion of the Gulf region and a portion of the north central U.S. expected to see average temperatures, while the only below-average temperatures are confined to an area of the north central region.
Still, cooler weather in the eastern U.S. in the eight- to 14-day period should once again limit demand and drive storage injections higher.
The eight- to 14-day weather outlook counters the bullishness of the near-term outlook. The forecast shows average temperatures across the majority of the eastern U.S., with some above-average temperatures in the Southeast and below-average temperatures in a portion of the Northeast and north central regions. Above-average temperatures, however, engulf the entire western half of the country.
The mix of weather over the midrange period offers the market little definitive support for sharp moves in either direction, while a steadily building natural gas inventory offers downside pressure that is limited by the possibility of a slowdown in the pace of storage building amid the weather changes.
In day-ahead trade, deals done for Tuesday at key delivery locations across the country moved higher with weather support.
Gains of about 10 cents were reported at hubs across the U.S., driving Transco Zone 6 NY to an index near $3.10, Tetco-M3 to an index atop $2.25, Henry Hub to an index near $3.10, Waha to an index atop $2.65, Chicago to an average near $2.95, SoCal Border to an index near $2.65 and PG&E Gate to more than $3.15.
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