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June natural gas futures turn defensive ahead of week's closing session

Essential Energy Insights - June 11, 2020

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June natural gas futures turn defensive ahead of week's closing session

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.

After ending the prior session up 7.7 cents at $2.814/MMBtu, NYMEX June natural gas futures pulled back overnight ahead of the Friday, May 11, open, as a recent and anticipated warming trend imply a continuation of larger storage builds in the weeks ahead. At 6:45 a.m. ET, the contract was 0.8 cent lower at $2.806/MMBtu.

Warmer weather that sapped demand for natural gas of late is seen to have contributed to a robust 89-Bcf injection to storage in the U.S. Energy Information Administration's latest inventory data for the week ended May 4. The reported storage build matched consensus estimates coming into the day and bested both the 75-Bcf five-year-average addition and the 49-Bcf prior-year build.

Total working gas stocks were at 1,432 Bcf, or 863 Bcf below the year-ago level and 520 Bcf below the five-year average of 1,952 Bcf.

Warmer conditions extended into the week ended May 9, much of which will be reflected in the next storage report that will cover the current week ending May 11. The warm weather drove a 14% increase in power burn week on week but also a 37% drop in residential/commercial-sector demand, which led the 4% decline in total U.S. gas consumption over the same period, according to the EIA's latest "Natural Gas Weekly Update." Dry production was near unchanged on the week.

Ongoing demand destruction associated with warmer weather combined with healthy production should allow for natural gas to flow more freely into underground storage facilities.

National Weather Service outlooks show above-average temperatures lingering over a majority of the country through both the upcoming six- to 10-day and eight- to 14-day periods, even as average temperatures initially contained to a few areas of the Midwest and Southwest eventually overtake slightly more of the Midwest and much of the West. Below-average temperatures are called to be contained to a small section of the Southwest through both periods.

Production growth is in store, as the latest North American Rotary Rig Count for the week to May 4 showed an increase of 11 in the combined oil and natural gas rig count in the U.S. to 1,032.

Pricing for natural gas booked Thursday for Friday flow was choppy.

Looking at the key hubs, a near 13-cent reduction drove Transco Zone 6 NY cash gas price activity to an index at $2.550/MMBtu, as an approximately 3-cent slump took PG&E Gate next-day gas pricing to an average at $2.746/MMBtu. By contrast, a better-than-3-cent gain brought benchmark Henry Hub spot gas price action to an average at $2.780/MMBtu, as a roughly 1-cent uptick nudged Chicago hub pricing to an index at $2.427/MMBtu.

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On a regional basis, Northeast and West Coast day-ahead gas prices faltered by between 2 cents and 3 cents on average to indexes at $2.244/MMBtu and $1.716/MMBtu, respectively. Gulf Coast spot gas pricing notched a 1-cent increase in deals averaging at $2.649/MMBtu, as Midwest cash gas price action unraveled less than 1 cent on the day to average $2.383/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.