Natural gas futures forged ahead most of Thursday, as they did every other session this week, bolstered by supply concerns and the potential for inadequate storage injections. Still, profit-taking in the final hour of trading shifted the prompt month into the red.

At A Glance:

  • EIA storage data confirms looser balances
  • Freeport outage uncertainty looms
  • Cash prices sink further ahead of holiday

The June Nymex gas futures contract settled at $8.308/MMBtu, down 6.0 cents day/day. July fell 5.5 cents to $8.400.

NGI’s Spot Gas National Avg. shed 19.5 cents to $7.940 on Thursday, ending its own three-day rally.

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Despite the late-session slump, demand drivers abound and analysts said bullish sentiment undergirds the market.

U.S. liquefied natural gas (LNG) reached 13 Bcf on Thursday – a high for the month – as spring maintenance projects at export facilities wind down and demand holds strong. Demand from Europe for the super-chilled fuel has surged amid Russia’s invasion of Ukraine. Countries across the continent, distancing themselves from the Kremlin, are calling for U.S. supplies to offset Russian gas.

At the same time, domestic weather demand is seasonally strong. Production, also affected by maintenance work, continues to lag the roughly 97 Bcf level that market participants said is needed. Output has hovered around 94 Bcf this week.

Bespoke Weather Services said Thursday that, while forecasts customarily shift day/day, “all models remain adamant” about robust heat “as we end the month and head into the start of June.” It noted “a new trough into the West, allowing hotter downstream ridging to develop in the eastern half of the nation again.” This is expected to allow exceptional early-summer heat in the South to extend over large swaths of the East.

“This is likely the base state we will have for the summer season, given the persistence of La Niña, where we are skewed hotter than normal,” Bespoke said.

Absent notably stronger production, the firm added, the United States may struggle to inject enough natural gas into underground storage during the summer months to ensure adequate supplies for the winter ahead. This is what had driven the upward pressure on prices earlier in the week.

Dicey Storage Situation

Utilities injected 89 Bcf of gas into storage for the week ended May 13, the U.S. Energy Information Administration (EIA) reported Thursday. The result was on par with expectations but left inventories lean for this time of year. 

Ahead of the print, analysts had expected an injection in the high 80s Bcf. The five-year average injection for the period was 87 Bcf. EIA posted a 71 Bcf increase for the year-earlier period.

The latest increase lifted inventories to 1,732 Bcf. At that level, however, stocks were well below the year-earlier total of 2,090 Bcf and the five-year average of 2,042 Bcf.

“After a late start, injections have been good thus far, but given where we ended winter, injections must be great” to meet demand this summer, said one analyst on The Desk’s online energy platform Enelyst.

By region, the South Central increase of 32 Bcf led all others and included a 24 Bcf injection into nonsalt facilities and a 10 Bcf increase in salts. EIA noted totals do not always equal the sum of components because of independent rounding.

The East and Midwest regions followed, with each posting injections of 22 Bcf, according to EIA. Mountain region stocks increased by 7 Bcf, while Pacific inventories rose by 4 Bcf.

Enelyst’s early polling showed expectations for next week’s EIA report ranging from injections of 85 Bcf to 109 Bcf.

However, because of continued strong cooling demand in the current week, the next EIA print may easily come in smaller than expectations, Bespoke said.

“As a result, we have lowered our estimate for next week’s number to 80 Bcf, versus the consensus we are hearing in the low 90s,” Bespoke said. 

EBW Analytics Group’s Eli Rubin, senior analyst, said outlooks calling for intense heat during the summer months limit future injections as well.

“From a market perspective, very warm weather may limit weekly injections and increase concerns over the low storage trajectory,” Rubin said. “If gas production remains low, heat stays high, and the storage deficit doesn’t shrink, natural gas price risks may increase in June.”

Spot Market Softens

Next-day cash prices varied by region, though the national average dipped lower for the first time in a week otherwise defined by robust demand.

Hubs throughout the South retreated after earlier outsized gains that were fueled by supply worries and mounting cooling demand.

El Paso Permian dropped 46.0 cents day/day to average $7.515, while Waha shed 45.5 cents to $7.515 and Henry Hub lost 27.5 cents to $8.170.

Still, more weather-driven demand lies ahead.

National Weather Service (NWS) data pointed to lofty temperatures further permeating the southern United States through this week and into next, with triple-digit highs likely in the Southwest and parts of Texas.

The heat is also projected to expand to the East by late this week, bringing highs in the 80s and 90s to several major markets, including New York City.

Ahead of that heatwave, several hubs advanced on Thursday. Cove Point spiked 81.0 cents to $8.750 and PNGTS climbed 15.0 cents to $8.615.

AccuWeather said eastern temperatures in the upper 80s to the mid-90s would affect close to 100 million people as soon as this weekend.

“In many areas, the heat and humidity this Saturday and Sunday will bring the hottest conditions since last August,” the firm said, “and in some locations, record highs that have stood for more than 100 years could be broken.”

Humidity levels also are expected to be elevated, the forecaster added, making it feel even hotter.

“Very warm and muggy conditions are in store Saturday night, and that will set the stage for hot and humid conditions on Sunday along much of the Interstate 95 corridor,” AccuWeather meteorologist Paul Pastelok said.