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James Hyerczyk
Natural Gas

Natural gas inched lower on Friday in a mostly lackluster trade after failing to follow-through to the downside, following the previous session’s steep break. The inside range price action suggests investors indecision and impending volatility. Perhaps we’re looking at the start of a transition period, fueled by Thursday’s capitulation-like sell-off and renewed concerns about heat. Is it possible that the summer heat has finally arrived?

On Friday, August natural gas settled at $1.544, down 0.002 or -0.13%. This was the fifth straight lower close.

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Thursday’s monster storage injection may have capped gains on Friday, but the market was likely underpinned by forecasts calling for extreme heat. The inability to rally, however, indicates that coronavirus demand-destruction and huge supply is still the main driver of the price action.

At best, we could see some short-covering on Monday if the week-end heat exceeds expectations. Furthermore, prices could rise if the weather models show the heat is likely to stick around longer than previously thought.

US Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration (EIA) reported Thursday that domestic supplies of natural gas rose by 120 billion cubic feet for the week ended June 19. That was more than the average increase of 107 billion forecast by analysts polled by S&P Global Platts.

Total stocks now stand at 3,012 trillion cubic feet, up 739 billion cubic feet from a year ago, and 466 billion cubic feet above the five-year average, the government said.


US/Canadian Oil & Gas Rig Count Falls to Record Low Again – Baker Hughes

U.S. and Canadian energy firms cut the number of oil and natural gas rigs operating to a record low again this week even as higher oil prices prompt some producers to start drilling again.

The U.S. oil and gas rig count, an early indicator of future output, fell by one to an all-time low of 265 in the week to June 26, according to data from energy services firm Baker Hughes Co. going back to 1940.

That was 702 rigs, or 73%, below this time last year, and was the eighth week in a row the U.S. count set a fresh record low. In June, the total U.S. rig count fell by 36, putting it down for a fourth month in a row.

U.S. oil rigs fell by one to 188 last week, their lowest since June 2009, while gas rigs held steady at 75, tying their lowest level on record, according to Baker Hughes data going back to 1987.

Short-Term Weather Outlook

Ahead of the weekend, NatGasWeather issued the following forecast for June 26 to July 2, “It remains comfortable across the east-central US with highs of 70s and 80s, while hot over the West into Texas and the Plains with highs of upper 80s to 100s, hottest in California and Southwest deserts.

The immediate East Coast is also very warm with highs of 80s to locally 90s to aid stronger national demand. Upper high pressure will strengthen over the Southeast this weekend into next week with highs into the 90s, although countered by weather systems over the West and Northeast with mostly comfortable highs of 60s to 80s.

Overall, demand will be moderate to high the next several days and then high next week.

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

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