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July gas bolstered by buying ahead of storage data release

After extending 7.4 cents lower in the prior session to settle at $3.071/MMBtu, NYMEX July natural gas futures advanced overnight ahead of the Thursday, June 1, open amid buying supported by expectations for a slower-than-normal pace of storage-building when the next weekly inventory data is released at midmorning. At 6:55 a.m. ET (1055 GMT), the contract was 3.7 cents higher at $3.108/MMBtu.

The July gas contract has notched a cumulative loss of 23.9 cents since the start of the truncated workweek and its debut as the lead offering, feeding sentiment of oversold conditions that is inspiring renewed buying.

Adding to upside momentum for futures, traders and analysts are looking at an inventory build trailing historical averages when the U.S. Energy Information Administration releases its next weekly storage report at 10:30 a.m. ET on Thursday that would cover the week ended May 26.

Estimates for the forthcoming inventory data call for a storage injection of anywhere from 70 Bcf to 80 Bcf, with consensus formed at a 75-Bcf build, which would be at par with the prior-week injection but below both the 97-Bcf five-year average build and 80-Bcf addition seen in the corresponding week in 2016.

Total working gas stocks currently sit at 2,444 Bcf, or 371 Bcf below the year-ago level and 241 Bcf above the five-year average of 2,203 Bcf.

A build to stocks at consensus in the forthcoming inventory report would bring overall inventories to 2,519 Bcf, shrinking the year-on-five-year-average surplus to 219 Bcf and expanding the year-over-year deficit to 376 Bcf.

Gains are being contained, however, by the prevalence of milder weather across the major demand centers in the central and eastern U.S. in midrange forecasts that is expected to limit demand for cooling.

In its latest outlooks, the National Weather Service sees average and below-average temperatures blanketing nearly all of the country's eastern two-thirds in the upcoming six- to 10-day period, as above-average temperatures settle over the bulk of the West, small patches of the central U.S. and southern Florida. Above-average temperatures overtake even more of the West and a larger section of the central U.S., however, in the eight- to 14-day period, shrinking the scope of average and below-average temperatures to slightly less but still a majority of the country's eastern two-thirds.

"Summer-like weather is at least moving into the western 40 to 50 percent of the country but the large population area east of the Rockies is still mostly expecting colder than normal temperatures through the first half of June," Energy Management Institute principal Dominick Chirichella said. "Until there is a decided shift in the weather across the US it is going to be difficult for the market to move into any sort of uptrend pattern," he said.

In cash action, the price of natural gas for day-ahead flow remained tethered to the downside in much of the country Wednesday, as lackluster weather expectations combined with ongoing losses in the futures arena.

Among the key delivery locations, the charge lower was led by Chicago next-day gas pricing that tumbled by 11 cents to an index at $2.783/MMBtu. PG&E Gate spot gas price activity followed with an almost 9-cent decline in trades averaging at $3.221/MMBtu, then benchmark Henry Hub cash gas price action that unraveled about 4 cents on the day to average at $3.051/MMBtu. Defying the wider retreat, Transco Zone 6 NY hub prices advanced by roughly 3 cents on average to an index at $2.542/MMBtu.

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Regionally, Midwest day-ahead gas price activity notched a near 8-cent reduction in deals averaging at $2.737/MMBtu, as West Coast and Gulf Coast next-day gas prices fell by roughly 9 cents on average to indexes at $2.550/MMBtu and $2.892/MMBtu, respectively. Northeast spot gas pricing deflated by about 6 cents to an index at $2.492/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.