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June natural gas surges, tops $2.90/MMBtu for 1st time since January

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 traded sharply higher with weather support Tuesday, May 22, as revised forecasts stoke storage concerns as strong cooling demand could limit weekly additions to natural gas supply. The contract surged past key support levels to close above $2.90/MMBtu for the first time since January. The contract settled at $2.908/MMBtu, up 9.8 cents on the day.

Revised National Weather Service projections show above-average temperatures holding over the country through both the six- to 10-day and eight- to 14-day periods, except for portions of the Southeast that should see average temperatures in the shorter-range view and a combination of average and below-average temperatures in the extended period.

Following a ramp-up in the rate of storage injections when the U.S. Energy Information Administration reported a 106-Bcf injection into the working gas supply in the week to May 11, analysts and traders looking to the upcoming storage report expect a marked decrease in additions for the week to May 18.

Early outlooks for the inventory report slated for release at 10:30 a.m. ET on Thursday, May 24, call for injections spanning the low 80s Bcf, which would compare against an 89-Bcf five-year average injection and the 74-Bcf injection reported for the corresponding week in 2017.

A build within the range of outlooks would widen the five-year-average deficit that currently sits at 501 Bcf, with a natural gas supply of 1,538 Bcf.

Weather during the review period to May 16 that will be reflected in the May 24 storage report generated 4% more consumption of natural gas than the previous review period, and as forecast, weather should continue to generate strong demand that could keep weekly storage injections trailing historical averages.

Natural gas inventories would need to build by an average 12 Bcf/d to reach an end-of-season inventory topping 3.5 Tcf. Slower inventory building could leave inventories at a less healthy level to start the next withdrawal season.

Staving off concerns, natural gas production could get a boost as the U.S. combined rig count continues to climb. The total rig count in the week to May 18 totaled 1,046, or 145 rigs above the corresponding week a year earlier.

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.