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August gas futures climbs as supportive fundamentals remain

Aftersettling 8.5 cents higher at $2.777/MMBtu ahead of the weekend, August naturalgas futures extended higher in overnight trading leading up to the Monday, July25, session amid ongoing support from shrinking inventory overhangs andforecasts for lingering heat across major demand centers that should allow fora further tightening of the supply/demand balance. At last glance,the front-month contract was up 1.7 cents at $2.794/MMBtu on lightshort-covering ahead of its midweek expiration.

Thestreak of below-average storage injections that has dominated the refill seasonhas driven a steady reduction in stock surpluses, evidence of a realignment ofthe supply/demand balance that is providing an undercurrent of support forvalues.

Thelatest storage report from the U.S. Energy Information Administration outlineda net 34-Bcf additionto stocks for the week to July 15 that continued the lackluster pace ofinventory-building as it compared against a 70-Bcf build seen in thecorresponding week in 2015 and the 61-Bcf five-year average injection.The reported build to stocks took overall inventories to 3,277 Bcf, cuttingsurpluses to the year-ago level and five-year average to 471 Bcf and 559 Bcf,respectively.

Weatherduring the storage review week is seen to have boosted cooling demand, limitingthe amount of natural gas available for moving into underground storagefacilities.

Withheat in store for the major cooling markets in the central and eastern U.S. inthe coming weeks, cooling demand looks to remain elevated, likely allowing fora continuation of the string of smaller-than-average storage injections and thefurther erosion of inventory overhangs.

TheNational Weather Service sees above-average temperatures encompassing the bulkof the country in the upcoming six- to 10-day and eight- to 14-day periods,leaving only Maine, a patch of the central U.S. and portions of the West in thescope of average to below-average temperatures.

Strongercooling demand would divert natural gas away from storage facilities and towardthe electric-power sector as utilities look to natural gas-fired generators tomeet air-conditioning load.

Atthe cash markets, the price of natural gas booked July 22 favored the upside inmuch of the country, as weather-related demand support reflected more on valuesat most locations than did pressure from the typical weekend inclusion in therevised offering.

Acrossthe major hubs, gains of about 10 cents on average drove Transco Zone 6 NY andChicago spot gas pricing to indexes at $2.830/MMBtu and $2.833/MMBtu,respectively. A better-than-9-cent uptick took PG&E Gate day-ahead gasprice activity to an index at $3.120/MMBtu, as a nearly 7-cent advance steeredbenchmark Henry Hub next-day gas price action to an index at $2.799/MMBtu.

Inregional terms, Northeast cash gas price activity notched a nearly 10-centincrease in deals averaging at $2.383/MMBtu, while Midwest next-day gas priceswere lifted almost 8 cents on average to an index at $2.702/MMBtu. West Coastspot gas price action picked up near 16 cents on the session to average at$2.729/MMBtu, while Gulf Coast day-ahead gas pricing rose about 9 cents intrading to an index at $2.714/MMBtu.

Market prices and included industry data are currentas of the time of publication and are subject to change. For more detailedmarket data, including power and natural gas indexprices, as well as forwards and futures, visitour Commodities Pages.