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James Hyerczyk
Natural Gas

Natural gas futures rose on Thursday after a government report showed gas in storage well below the forecast. Prices moved up on the news, but not too much as it still represented a build during the first week of the summer cooling season. The market would’ve moved a lot higher if there was a drawdown, but such is life during the coronavirus pandemic.

On Thursday, August natural gas settled at $1.734, up $0.063 or 3.77%. For the week, the market was up $0.190 or 12.31%.

With the exception of Thursday’s rally, most of the gains were attributed to hot weather and short-covering. And maybe some speculative buyers, if there are any left following the drilling they took just a week ago when prices hit a multi-year low.

U.S. Energy Information Administration Weekly Storage Report

According to EIA estimates, working gas in storage was 3,077 Bcf as of Friday, June 26, 2020. This represents a net increase of 65 Bcf from the previous week. Stocks were 712 Bcf higher than last year at this time and 466 Bcf above the five-year average of 2,611 Bcf. At 3,077 Bcf, total working gas is within the five-year historical range.

The consensus estimate was for a 77 Bcf storage build. The national survey averages called for a build of +74-79 Bcf. NatGasWeather’s algorithm predicted a build of 68 Bcf.

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Short-Term Weather Outlook

According to NatGasWeather for July 2 – July 8, “Upper high pressure will stretch from Texas to the Great Lakes and across the rest of the southern US with very warm to hot highs of upper 80s to 100s, hottest in the Southwest deserts.

Cooler exceptions continue across the Northwest and New England as weather systems stall with showers and highs of 60s and 70s locally light demand.

The Fourth of July weekend will remain very warm to hot over most of the U.S. with highs of upper-80s to 100s besides the far northwest and northeast corners. There will also be heavy showers over the Southeast this weekend, although still very warm & humid with highs of upper 80s to lower 90s.

Overall, national demand will be high.”

Short-Term Outlook

Given the long-holiday weekend, we’re likely to see a gap in prices in either direction, depending on the changes in near-term forecast. Remember that traders are looking 14 days out. This weekend’s heat has already been priced in.

Next week’s build will be a little smaller than this week due to hotter conditions across many US regions week over week.

For a look at all of today’s economic events, check out our economic calendar.

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