- BREAKING: U.S. EIA on Thursday reported an injection of 115 Bcf natural gas into storage for the week ending May 21
- The June contract finishes Wednesday with 7-cent gain
- Storms a wildcard for export volume
Natural gas futures on Wednesday built on the gains of a day earlier as a favorable shift in the weather-demand outlook offset expectations for a triple-digit storage injection with the federal government’s pending inventory report Thursday.
The June Nymex contract gained 7.1 cents day/day and rolled off the board after settling at $2.984/MMBtu on Wednesday. It had gained 2.7 cents on Tuesday.
The June contract hovered near the $3.00 level over much of its span at the front of the curve, but it fell short of breaking through and staying above that threshold.
July, which takes over as the prompt month Thursday, gained 5.3 cents to $3.027.
NGI’s Spot GasNational Avg. rose a half-cent to $2.700.
In terms of demand for natural gas to cool homes and businesses, forecasts on Wednesday improved from earlier in the week, with more intense heat likely next week in the Midwest and East, Bespoke Weather Services said. Both are key regions for natural gas consumption.
“The forecast has stepped warmer overall,” Bespoke said Wednesday. While cooler air is still expected in the nation’s midsection and in the Northeast over the looming Memorial Day weekend, any chills “look quite brief before upper level ridging sets up shop once again in the eastern U.S. This keeps total demand over the next 15 days as a whole above normal, even with the cooler period in play.
“The next couple of weeks fit perfectly into the theme we are expecting for the month of June as a whole,” the firm added. “While we get some variability, the bias of the pattern, on the national scale, is to the hotter side of normal, with above normal heat in the East, and out West, and some weakness in the central U.S.,” Bespoke said.
The firm said that, for the July contract’s initial run as the prompt month, “much depends” on Thursday’s U.S. Energy Information Administration (EIA) storage report for the week ended May 21.
Storage Estimates
Injection estimates in a Bloomberg poll as of Wednesday showed a median estimate of 106 Bcf. Predictions ranged from 99 Bcf to 109 Bcf. Results of a Reuters survey, meanwhile, ranged from injections of 96 Bcf to 110 Bcf, with a median build of 106 Bcf.
A Wall Street Journal survey landed at an average build expectation of 101 Bcf. Estimates ranged from increases of 92 Bcf to 109 Bcf.
NGI’s model is calling for a 107 Bcf injection.
The estimates compare with a 105 Bcf increase in storage a year earlier and a five-year average injection of 91 Bcf. EIA is scheduled to release its weekly inventory report at 10:30 a.m. ET Thursday.
“If the build tomorrow is only around 100 Bcf or less, we may finally hold above the $3.00 level in prompt month, especially now that weather is shifting back more supportive,” Bespoke said.
EBW Analytics Group said the July contract may also need support from renewed liquefied natural gas (LNG) momentum. LNG feed gas volumes dipped below 10 Bcf on Wednesday – well off the robust 11 Bcf level that had become the norm over April and early May.
“After averaging 11.4 Bcf/d for the first 10 days of May, LNG feed gas demand has wavered over the past two weeks — averaging only 10.5 Bcf/d — amid seasonal maintenance outages, pipeline outages” and weather-induced interruptions, EBW analysts said. They noted that maintenance outages at several Gulf Coast export facilities “may continue over the next week or two” and then “the primary impediment to LNG feed gas demand will soon become tropical storms.”
The Climate Prediction Center of the National Oceanic and Atmospheric Administration last week said there was a 60% chance of an above-normal hurricane season this year. The official hurricane season starts June 1.
EBW analysts said the good news is that demand for U.S. LNG remains elevated and, barring prolonged storm interruptions, export volumes are likely to soon return to the 11 Bcf level – or higher – and remain there much of the summer. Demand for U.S. exports of the super-chilled fuel is steady from both Europe and Asia.
Cash Prices
Spot gas prices varied by region but the national average rose modestly alongside gains in California, where desert heat took hold and maintenance work threatened to curb supplies.
Prices atSoCal Citygate advanced 11.5 cents day/day to average $4.095, building on solid gains each of the two prior days. Sempra Energy’s Southern California Gas Co. planned a four-day maintenance event to begin Wednesday that was expected to cut into imports, affecting SoCal Citygate.
Elsewhere in California,Southern Border, PG&E picked up 5.0 cents to $2.600 andSoCal Border Avg. tacked on 3.0 cents to $2.875.
National Weather Service data showed large swaths of heat over the Southeast on Wednesday, with highs in the 90s, as well as 80s up the mid-Atlantic and into the Northeast. Prices, however, were mixed throughout eastern regions.
In the Southeast, for example,Tenn Zone 1 100L gained 3.0 cents to $2.735, whileFlorida Gas Zone 3 shed 4.5 cents to $2.950.
Prices mostly inched ahead across Texas and the Midwest, withChicago Citygate up 3.0 cents to $2.805.
Much of the Midwest and Great Lakes saw highs of 50s to 70s, and comfortable temperatures were expected to linger for several days.
Looking ahead to next week, cooling demand is expected to prove light early across the northern and central sections of the country, with mild highs for this time of year in the 70s and 80s. Temperatures in the West and East are expected to escalate into the 90s, for a mixed overall demand picture.
“A trough will track out of the Southwest” following Memorial Day, bringing cooler changes to parts of the Plains and lower Midwest. Below-normal temperatures are in Texas for most days, over wet soils and continued unsettledness” amid sporadic rains and thunderstorms, said Steve Silver, Maxar’s Weather Desk senior meteorologist.
More consistent heat is on the way, however.
“A ridge is strong over the West with above-normal coverage,” Silver said. Temperatures are forecast to peak next week in the low 100s in parts of California and at 90 in the Pacific Northwest. “As a trough deepens over the northern Pacific,” Silver said, “aboves will spread eastward along the northern tier and into the East” by late next week.
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May 28, 2021 at 12:01AM
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June Natural Gas Futures Contract Rolls Off Board Following Robust Gain - Natural Gas Intelligence
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