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In This List

August gas futures rebound as traders look to imminent heat

Essential Energy Insights - September, 2020

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August gas futures rebound as traders look to imminent heat

Followinga 3.4-cent decline in the week's opening session to a settle at , August natural gasfutures retraced higher overnight ahead of the Tuesday, July 19, open, assupportive weather-related demand expectations and shrinking stock overhangsreflected more on values than the still-robust inventories poised to end therefill season at a record-high level.

After covering a range of $2.717/MMBtu to $2.769/MMBtu in overnighttrading, the front-month contract was last seen trading at $2.766/MMBtu, up 4.4cents from Monday's close.

Naturalgas futures continue to alternate between gains and losses, with the marketheld in tension amid widespread warming in the coming weeks that should boostdemand and allow for additional below-average storage builds that would trimstock surpluses, and expectations for record-high inventories ahead of winterdespite the lackluster pace of storage-building.

Inthe latest National Weather Service forecasts, above-average temperaturesenvelop the U.S. save for much of the Midwest and a small area of the Northwestin the upcoming six- to 10-day period, but expand in scope further out to theeight- to 14-day period to overtake the entire country.

Heatin forecasts suggests stronger cooling load and elevated power-sector demandfor natural gas, as utilities look to gas-fired generators to meet increasedair-conditioning load. This should divert natural gas away from storagefacilities, keeping intact the subdued rate of weekly injections that has thusfar prevailed through the refill season.

Naturalgas inventories have been building steadily throughout the injection season butat a level predominantly below historical averages, with the most recentstorage data from the U.S. Energy Information Administration outlining a64-Bcf build for theweek to July 8 that compared against a 95-Bcf injection seen in thecorresponding week in 2015 and a 77-Bcf five-year average addition to stocks.

Althoughthe reported injection improved total stocks to 3,243 Bcf, it reduced surplusesto the year-ago level and five-year average to 507 Bcf and 586 Bcf,respectively.

Forthe next weekly inventory report that will cover the week to July 15, mosttraders and analysts anticipate another modest addition to storage of anywherefrom 35 Bcf to 40 Bcf, which would compare against the 61-Bcf five-year-averagebuild and the 70-Bcf injection in the same week in 2015.

Notwithstandingthe ongoing lackluster pace of storage-building, however, preliminary estimatesfor the end-of-season inventories remain hefty. The EIA, in its latest"Short-term Energy Outlook," sees total gas stocks reaching arecord-high of 4,022 Bcf at the end of October, even with smaller-than-averageinjections to storage.

Incash action, the price of natural gas moved Monday for Tuesday flow was biasedhigher in much of the country, as returning business-related load at the onsetof a new workweek combined with warmer weather to boost demand expectations.

Acrossthe major delivery locations, gains of between 19 cents and 20 cents on averagetook Chicago and Transco Zone 6 NY next-day gas prices to indexes at$2.824/MMBtu and $2.004/MMBtu, respectively, as a near 17-cent increase broughtPG&E Gate spot gas price activity to an index at $3.026/MMBtu and a 13-centuptick steered benchmark Henry Hub cash gas pricing to an index at $2.825/MMBtu.

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On aregional basis, Midwest spot gas price action added almost 16 cents on thesession to average at $2.715/MMBtu, as Northeast day-ahead gas pricing climbedby roughly 8 cents to an index at $2.221/MMBtu. West Coast cash gas pricessoared by 21 cents on average to an index at $2.607/MMBtu, as Gulf Coastnext-day gas price activity notched a near 12-cent advance in transactionsaveraging at $2.691/MMBtu.

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