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July gas retains upside bias on technical buying, bullish weather prospects

After ending a five-day losing streak with a 6.0-cent gain in the prior session at a settle at $3.042/MMBtu, NYMEX July natural gas futures extended higher overnight ahead of the Wednesday, June 7, open amid ongoing technical buying supported by warmer weather outlooks that spelled stronger demand and smaller storage builds in the coming weeks. At 6:38 a.m. ET (1038 GMT), the contract was 4.6 cents higher at $3.088/MMBtu.

The National Weather Service continues to see above-average temperatures spanning nearly the entire eastern two-thirds of the country and the fringes of the Southwest in the upcoming six- to 10-day period, before spilling into a majority of the Southwest further out to the eight- to 14-day period. Average to below-average temperatures settle over a few portions of the central U.S. and the bulk of the West in the shorter-range view but shrink in scope over the West in the longer-range period.

Warmer weather on deck should ramp up cooling demand, which would boost power-sector demand for natural gas as utilities work to meet customer load, and drive down the amount of natural gas available to be moved into underground storage facilities.

Ahead of a potential slowdown in the rate of weekly storage builds, however, market participants are looking at an impressive injection to stocks when the U.S. Energy Information Administration releases its next weekly inventory data on Thursday.

Weather and the inclusion of the Memorial Day holiday weekend in the forthcoming storage report week ended June 2 is expected to have sapped demand and allowed for a near 100-Bcf injection, which would compare against a 94-Bcf five-year average build and a 68-Bcf addition seen in the corresponding week in 2016.

Total working gas stocks currently sit at 2,525 Bcf, or 370 Bcf below the year-ago level and 225 Bcf above the five-year average of 2,300 Bcf, after the EIA outlined a net 81-Bcf injection during the week ended May 26. This included a reclassification of 4 Bcf from working gas to base gas in the Mountain region, resulting in an implied flow of 85 Bcf for the week in review.

In cash action, the price of natural gas for next-day flow was predominantly biased higher June 6, in line with the day's gains in futures.

Across the key hubs, the charge to the upside was led by Transco Zone 6 NY day-ahead gas price activity that logged a 20-cent gain in transactions averaging at $2.300/MMBtu. PG&E Gate spot gas pricing followed with a roughly 8-cent advance to an index at $3.185/MMBtu, then benchmark Henry Hub cash gas price action that tacked on almost 8 cents on the session to average at $2.995/MMBtu and Chicago hub pricing that clawed up by 1 cent to an index at $2.857/MMBtu.

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In regional terms, Northeast spot gas price action shed around 7 cents against the broad uptrend to average at $2.330/MMBtu, as West Coast and Midwest next-day gas prices climbed by roughly 4 cents on average to indexes at $2.631/MMBtu and $2.795/MMBtu, respectively. Gulf Coast day-ahead gas pricing notched a near 3-cent increase in deals averaging at $2.863/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.