Editor's Note:
July natural gas futures traded higher Thursday, May 31, following the release of a storage report from the U.S. Energy Information Administration that outlined an injection that was below market expectations. The contract settled 6.7 cents higher at $2.952/MMBtu.
The EIA reported a net 96-Bcf addition to the natural gas supply in the week to May 25 that was below the market's anticipated 100-Bcf build and trailed the 97-Bcf five-year-average injection. Inventories improved to 1,725 Bcf, or 788 Bcf below the year-ago level and 500 Bcf below the five-year average storage level of 2,225 Bcf.
July natural gas futures jumped to a $2.988/MMBtu intraday and near four-month high following the data's 10:30 a.m. ET release but backed off as near-term fundamentals suggest demand erosion and larger storage injections ahead.
In its latest projections, the National Weather Service sees average to below-average temperatures stretching from the East Coast into the upper fringes of the Midwest and portions of the Northwest in the upcoming six- to 10-day period, then receding from parts of the western U.S. but overtaking a majority of the eastern half of the U.S. in the eight- to 14-day period. Above-average temperatures settle elsewhere in the country.
The milder temperatures should drive demand erosion and leave more natural gas production available to be stowed away for use during the peak winter heating season.
Helping feed the possibility for a continuation of the healthy pace of storage rebuilding going forward, a steadily rising rig count spells an impending boost to production that should leave more natural gas available to flow into underground stocks. Baker Hughes' weekly U.S. gas and oil rig count data outlined an increase of 13 rigs in the week to May 25 to 1,059.
Despite near-term fundamentals, the market remains skittish heading into the peak summer cooling months.
"The longer-term picture looks bullish because of worries about stronger cooling demand while there remains a storage deficit," FX Empire analyst James Hyerczyk said.
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.
