James Hyerczyk
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Natural Gas

Natural gas prices soared last week on the back of strong cooling demand needs as temperatures rose in Texas and throughout much of the central United States. According to Natural Gas Intelligence (NGI), the Weekly Spot Gas National Average climbed 13.0 cents to $2.930. News that a major pipeline could operate at a reduced pressure on a portion of its system for several months also provided support.

With most of the focus on expected heat and reduced supply, storage data, which is typically a big driver of price volatility, was mostly ignored by traders.

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Last week, September natural gas settled at $3.301, up $0.196 or +6.31%.

Cash Market Sizzles

NGI said on Friday that the lower demand levels that typically accompany the weekend had little bearing on spot prices at the end of the week. With temperatures forecast to continue reaching the mid-90s to low 100s across the central and southern United States, big gains were seen across those regions.

NatGasWeather added the West was also due for some “very strong regional demand” in the coming days as a dangerously hot upper ridge was setting up over the Southwest into the Plains. Highs were expected to reach as high as 115 degrees over less populated states. This is why national cooling days were only near normal to slightly above normal.

“After an initial cool shot exits the East late” in the coming week, “a second is forecast to follow June 21-23 for near-normal national demand,” NatGasWeather said. Again, though, models were “favoring high pressure over the West shifting over the more important South and Southeast June 24-27 for an increase in national demand and where the pattern would likely again be hot enough to satisfy.”


Energy Information Administration Weekly Storage Report

The EIA reported last Thursday a 98 Bcf injection into inventories for the week-ending June 4. Traders were looking for the EIA’s storage report to show a sizable build, with estimates ranging from an injection in the 90s to low 100s. The consensus was calling for an injection of 99 Bcf.

That would compare with last year’s 95 Bcf injection for the similar period and the 92 Bcf five-year average, according to EIA.

Total working gas in storage as of June 4 stood at 2,411 Bcf, which is 383 Bcf below last year and 55 Bcf below the five-year average, the EIA said.

Weekly Forecast

The tone is likely to be bullish this week with prices supported by the reduced pressure from the TETCO pipeline and the intense heat building on the West Coast.

According to reports, Enbridge Inc’s Texas Eastern Transmission (TETCO) unit said late Thursday it anticipated the earliest its 30-inch natural gas pipe from Pennsylvania to Mississippi could return to full pressure was late in the third quarter of 2021.

In weather-related news, the California power grid operator told the public to prepare to conserve energy next week if needed as homes and businesses crank up their air conditioners to escape what is forecast to be a brutal heatwave.

LNG feed gas demand remains well off record highs. NGI data showed deliveries to U.S. terminals sitting at around 9.6 Bcf on Friday, with Cameron and Sabine Pass likely down because of maintenance. Prices could jump even higher over the near-term once the maintenance is completed and if demand jumps again.

As far as the weather is concerned, traders will be eyeing the 15-day forecast for new patterns calling for heat in late June/early July.

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