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Prices Seen Intact, But July Called A Penny Lower

July natural gas is expected to open a penny lower Wednesday morning at $2.76 as traders balance current prices with no change in overnight weather data. Petroleum markets rose.

A top energy consulting firm sees the current rally in natural gas prices as intact.

"Despite Thursday's slightly higher-than-expected storage release of 69 Bcf, the general momentum in structural tightness appears to be adequate to safeguard the approximately 15% rally in natural gas prices this month," said PIRA Energy in a report. "To be sure, sequential domestic production losses and early cooling demand have raised the floor for the prompt futures contract as well as cash prices.”

Exports are expected to remain robust. "Since 2014, Mexican energy policy reforms, coupled with low oil prices, have accelerated the nation's dependency on U.S. gas exports," PIRA said. "Indeed, net shipments to Mexico remain upward trending, with June flows projected to average approximately 3.7 Bcf/d, an increase of approximately 0.7 Bcf/d versus the prior year. Equally striking is our expectation for 2017, which should see exports average approximately 4.5 Bcf/d and yield a year-on-year gain of approximately 0.9 Bcf/d. Notably, the upgrading and development of new critical infrastructure, including gas pipelines, electric generation and transmission capacity, are anticipated to significantly shape cross-border flows in 2017, providing a rich environment for gas demand."

Weather models changed  little overnight. "The big picture idea of hottest anomalies in the western states with warm weather along the northern tier and lots of near normal Midwest, East and South (especially for the 11-15 day) continues again [Wednesday]," said Commodity Weather Group in its morning report to clients.

"We added more heat to California with now two days at 100-101 F for Burbank early next week and more for Sacramento. No significant demand adjustments are noted overnight as we see some mixed short-range forecast changes and then generally hotter West and same to cooler Midwest, East, and South at times for the six-15 day segment. The overnight models collectively lost demand with some minor cooler changes overall."

In overnight Globex trading August crude oil added 24 cents to $50.09/bbl and August RBOB gasoline rose fractionally to $1.6053/gal.

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