Market

With more of its bountiful natural gas destined for Asia-Pacific markets, leaving less for domestic use, Australia Pacific LNG (APLNG) last week agreed to provide 16.2 petajoules (PJ) of natural gas to the country’s manufacturing market.

Natural gas futures continued to slide on Wednesday as weather models, while converging, failed to trend much warmer for the end of June/early July period. With another 100 Bcf-plus storage injection expected on Thursday, the July Nymex gas futures contract fell 5.2 cents to $2.276/MMBtu. August slipped 4.8 cents to $2.263.

After a brief swing into positive territory, natural gas futures prices on Wednesday ultimately gave back a bit of the previous three days’ worth of gains as traders focused on an expected triple-digit storage build rather than on increasing heat in weather models. The July Nymex gas futures contract settled 1.3 cents lower at $2.386, with similarly small losses seen through the rest of the curve.

Crude oil prices have taken a hit in recent weeks amid concerns over global economic growth prospects, just as U.S. production is on track to reach record levels and as recent data points to swelling domestic stockpiles, leaving the market to navigate “rising supply and demand uncertainties,” according to analysts.

Not even stronger power burns were enough to stop the renewed downside momentum on Wednesday in natural gas futures prices, which slipped a few cents at the front of the Nymex curve as weather models chopped even more demand from outlooks. Spot gas prices were mostly higher given pockets of localized heat. The NGI Spot Gas National Avg. climbed 12 cents to $2.055.

A day/day drop in the latest production numbers helped natural gas futures rally into the front month expiration Wednesday, although forecasts were mixed on the outlook for June heat. In the spot market, strong cooling demand in the Southeast kept prices there steady as the Midcontinent saw more negative trades; the NGI Spot Gas National Avg. climbed 11.5 cents to $2.060/MMBtu.

A less than impressive forecast for early June and expectations for another triple-digit storage injection created an opening for bears to extend a recent sell-off in the natural gas futures market Wednesday. In the spot market, sweltering conditions in the Southeast couldn’t stave off widespread discounts; the NGI Spot Gas National Avg. fell 1.0 cent to $2.080/MMBtu.

Editor’s Note: NGI’s Mexico Gas Price Index, a leader tracking Mexico natural gas market reform, is offering the following column as part of a regular series on understanding this process, written by Eduardo Prud’homme. This is the seventh in the series.

The Energy Information Administration (EIA) on Thursday reported an on-target 106 Bcf weekly injection into U.S. natural gas stocks, and futures gained following the news.