Afterending the prior session down 0.9 cent at $2.777/MMBtu, August natural gasfutures extended lower overnight ahead of the Friday, July 8, open, as traderslook beyond the ongoing lackluster pace of storage-building implied by thelatest inventory report in favor of expectations for a robust end-of-seasonstock level. The contract was last seen 1.1 cents lower at$2.766/MMBtu.
TheJuly 7 storage data from the U.S. Energy Information Administration outlined anet 39-Bcf injection tostocks for the week to July 1 that missed consensus coming into the day that hadcalled for a 44-Bcf build, and compared below both the 83-Bcf injection in thecorresponding week last year and the 77-Bcf five-year-average addition toinventories.
Thereported injection took overall inventories to 3,179 Bcf, still 538 Bcf abovethe year-ago level and 599 Bcf above the five-year average of 2,580 Bcf.
Thestorage data's miss against expectations and historical averages drove gains inthe market immediately following the report's release, but the upside was soonrelinquished as participants took a longer view of the market that sawinventories ending the refill season at a robust level.
Thelatest natural gas supply/demand data from the EIA suggests an uptick in therate of storage injections for the current week, but weather outlooks furtherout spell renewed demand strength that should allow for a reprise of modeststock builds ahead.
TheEIA's latest "Natural GasWeekly Update" for the week ended July 6, which will bepartially covered in the next storage report for the week to July 8, showedthat U.S. natural gas consumption fell by 4% week over week amid reduced demandacross all sectors, while supply climbed by 1% on the back of rising production.
Diminisheddemand alongside increased supply should allow for more natural gas to be movedinto underground storage facilities, driving an uptick in the rate of weeklyinjections.
Inthe midrange, however, weather outlooks call for widespread warming that shouldboost cooling load and subsequently drive up power-sector demand for naturalgas as utilities work to meet air-conditioning requirements, likely limitinganew weekly storage improvements.
UpdatedNational Weather Service forecasts for the six- to 10-day and eight- to 14-dayperiods reflect above-average temperatures across the bulk of the countryencompassing a majority of the central U.S. and the entire East, leaving onlyportions of the West in the scope of average to below-average temperatures.
Inany case, preliminary estimates for end-of-season stocks remain pegged at arecord level of about 4.1 Tcf, despite the prevalence of below-average storagebuilds thus far in the refill season. "Although EIA projectslower-than-average injections, the record-high starting point of the injectionseason allows for a projected end-of-October record high," the agency saidin its latest "Short-term Energy Outlook."
Atthe cash markets, weather-related demand support in much of the countryencouraged the upside to prevail in price activity for natural gas bookedThursday for Friday flow.
Acrossthe major delivery locations, the charge higher was led by Chicago day-aheadgas pricing that added near 14 cents on the session to average at $2.789/MMBtu.This was followed by benchmark Henry Hub and Transco Zone 6 NY cash gas pricesthat climbed by almost 10 cents on average to indexes at $2.872/MMBtu and$2.931/MMBtu, respectively, then PG&E Gate hub action that rose by about 7cents to an index at $2.691/MMBtu.
Regionally,Midwest spot gas price activity notched a near 10-cent gain in deals averagingat $2.679/MMBtu, while Gulf Coast next-day gas pricing was lifted by a littleover 9 cents to an index at $2.729/MMBtu. Northeast cash gas price actiondeflated by around 10 cents against the wider uptick to average at$2.459/MMBtu, as West Coast day-ahead gas prices advanced by more than 13 centson average to an index at $2.422/MMBtu.
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