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August gas extends advance as fundamentals remain bullish

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August gas extends advance as fundamentals remain bullish

Aftera finish up 2.4 cents at $2.801/MMBtu ahead of the weekend, August natural gasfutures are extending gains in overnight trading leading up to the Monday, July11, open, as storage and weather expectations feed anticipation of a steadyerosion of inventory overhangs that would imply a realignment of thesupply/demand balance. The contract was last seen 5.0 cents higher at$2.851/MMBtu.

Thelackluster rate of weekly storage injections that has dominated the refill seasonthus far remained intact during the week ended July 1, as the latest U.S.Energy Information Administration inventory data for this review period showeda 39-Bcf build thatcompared against an 83-Bcf injection in the corresponding week last year andthe 77-Bcf five-year-average addition to stocks. The reportedinjection took overall inventories to 3,179 Bcf, trimming the year-on-yearoverhang to 538 Bcf and shrinking the year-on-five-year-average surplus to 599Bcf.

"Whilestorage levels remain significantly elevated, we anticipate natural gas marketswill continue to benefit from correcting of the overhang as weekly injectionsremain below the five-year average," Stifel analysts said in a July 8 note.

Preliminaryestimates for the next weekly storage data that will cover the week to July 8call for a build to stocks larger than in the week ago but still belowhistorical averages. Market participants anticipate a storage addition of about60 Bcf that would compare against the 77-Bcf five-year-average build and the95-Bcf injection reported in the same week in 2015.

Weatherprojections reflecting heat across the bulk of the country spell elevateddemand that should limit the amount of natural gas available to be moved intounderground storage facilities, thereby allowing for additional modest buildsto storage that would further trim inventory overhangs. TheNational Weather Service sees above-average temperatures stretching from alarge area of the West into all of the central and eastern U.S. in the upcomingsix- to 10-day and eight- to 14-day periods, leaving only parts of the West inthe scope of average to below-average temperatures.

Incash trading, the natural gas offering July 8 that was revised for Saturday-through-Mondaydelivery was moved at reduced values in much of the country, as the inclusionof the low-demand weekend days combined with milder weather expected throughthe two-day break.

Atthe key hubs, the charge lower was led by Transco Zone 6 NY spot gas pricingthat tumbled by $1.26 on the session to an index at $1.671/MMBtu. Chicagoday-ahead gas price activity followed distantly with a 13-cent decline in dealsaveraging at $2.659/MMBtu, then benchmark Henry Hub next-day gas price actionthat shed almost 8 cents on the day to average at $2.795/MMBtu. Meanwhile,PG&E Gate hub pricing was near unchanged at an index at $2.692/MMBtu.

Regionalaverages were weaker overall. Day-ahead natural gas prices in the Northeast fellby about 46 cents on average to an index at $1.996/MMBtu, as cash gas pricingin the Midwest deflated by roughly 9 cents on the day to average at$2.592/MMBtu. Spot gas price action in the Gulf producing region slumped bynear 8 cents to an index at $2.648/MMBtu, as next-day gas price activity on theWest Coast eased by a little over 3 cents to average at $2.388/MMBtu.

Marketprices and included industry data are current as of the time of publication andare subject to change. For more detailed market data, including power and natural gas indexprices, as well as forwards and futures, visitour Commodities Pages.