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June natural gas retreats as storage builds seen accelerating

Editor's Note: Please be advised that S&P Global Market Intelligence will no longer publish daily articles on price trends in the U.S. natural gas, electricity and emissions markets beginning June 1, 2018. Pricing data for these energy markets will continue to be available on the Market Intelligence platform.

June natural gas futures were lower at midweek Wednesday, May 16, as participants look to the May 17 release of storage data for the week to May 11, with the expectation of a triple-digit injection. The contract settled 2.1 cents lower at $2.815/MMBtu.

The U.S. Energy Information Administration's natural gas inventory report slated for release at 10:30 a.m. ET on May 17 is expected to outline a storage injection from 99 Bcf to 110 Bcf, with a consensus pegged at a 104-Bcf build.

The latest figure would be a step up from the 89-Bcf injection reported for the week to May 4 and from a 64-Bcf injection for the same week in 2017 and the 87-Bcf five-year average build. At consensus, the build would drive the total working gas supply to 1,536 Bcf, or 843 Bcf below the year-ago level and 503 Bcf below the five-year average storage level of 2,039 Bcf.

The expected ramped-up rate of storage injections pressed prices lower, while weather forecasts that point to conditions that should keep inventories building provided downward pressure.

During the week ended May 9, warmer weather triggered a 14% increase in power burn week on week but a 37% drop in residential/commercial-sector demand, according to the EIA's latest "Natural Gas Weekly Update." Total U.S. gas consumption was down 4% on the week. Dry production was flat on the week.

Warmer weather is in store further out. The latest National Weather Service projections for the six- to 10-day and eight- to 14-day periods continue to reflect above-average temperatures across nearly the entire country.

"We continue to look for the possibility of a two-sided trade because projected warm weather suggests low heating demand, but the building of cooling demand, could have a mixed impact on the rate of subsequent storage injections," FX Empire analyst James Hyerczyk said in a May 16 note.

However, a steadily rising rig count implies impending production growth, which would leave more natural gas available to flow into underground storage facilities.

According to the American Gas Association's latest "Natural Gas Market Indicators" report, injections of about 12 Bcf/d on average would be needed for working gas inventories to reach above 3.5 Tcf by early November. "Based on the past week's report we are right on that pathway," the association 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, natural gas index prices, as well as forwards and futures, visit our Commodities pages.