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June natural gas futures take offensive on warmer weather outlooks

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June natural gas futures take offensive on warmer weather outlooks

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 shedding 3.7 cents to settle at $2.810/MMBtu in the week's opening session, NYMEX June natural gas futures ticked higher overnight ahead of the Tuesday, May 22, open, on the back of renewed weather support. At 6:40 a.m. ET, the contract was 2.3 cents higher at $2.833/MMBtu.

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, save for portions of the Southeast that should see average temperatures in the shorter-range view and a combination of average to below-average temperatures in the extended period.

Warmer weather in store should drive an additional boost to cooling demand, already seen limiting the pace of storage improvements when the next weekly inventory report is released on May 24.

An early jump in cooling load and lingering demand for heating boosted overall consumption for natural gas by 4% in the week to May 16, compared with the previous report week, the U.S. Energy Information Administration said in its latest "Natural Gas Weekly Update." This suggests a slower rate of injections to stocks in the forthcoming storage report that will cover the week ended May 18, with preliminary estimates calling for builds in the low 80s Bcf.

An addition to stocks within the range of outlooks would signal a slowdown in the rate of storage improvements, following the 106-Bcf injection during the week ended May 11 that took total working gas stocks to 1,538 Bcf.

An impending boost to production signaled by an elevated rig count, however, could meet increased cooling demand amid warmer weather and would help natural gas inventories continue building to a healthy end-of-season level.

In the latest rig count report for the week to May 18, the combined oil and natural gas rig count in the U.S. was up one at a total of 1,046, or 145 rigs above the corresponding week a year earlier.

Demand and production trends will play a major role in efforts to rebuild inventories, with analysts pointing to an average build of 12 Bcf/d needed in order to bring storage to an end-of-season level atop 3.5 Tcf.

Cash gas price activity predominantly favored the upside coming off the weekend Monday.

Among the major hubs, Transco Zone 6 NY day-ahead gas prices led the charge higher with an almost 29-cent increase on average to an index at $2.740/MMBtu. Chicago spot gas price action followed with a near 10-cent gain in trades averaging at $2.550/MMBtu, then PG&E Gate hub activity that added about 5 cents on the session to average at $2.947/MMBtu and benchmark Henry Hub cash gas pricing that advanced by roughly 2 cents to an index at $2.767/MMBtu.

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On a regional basis, Northeast spot gas price activity logged a scant less-than-1-cent uptick in deals averaging at $2.363/MMBtu, as Midwest next-day gas prices climbed by around 9 cents on average to an index at $2.423/MMBtu. West Coast day-ahead gas pricing was lifted by roughly 6 cents to an index at $1.809/MMBtu, as Gulf Coast cash gas price action tacked on approximately 1 cent to average at $2.719/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.