With the market keying in on a hotter outlook heading into the second half of June, and with a surplus-trimming weekly government inventory report expected, natural gas futures rallied in early trading Thursday.
The July Nymex contract was up 9.7 cents to $2.854/MMBtu as of 8:43 a.m. ET. August was up 9.2 cents to $2.920.
Choppy price action has seen daily closes for the July contract gravitate toward the $2.58 and $2.75 areas in recent sessions, EBW Analytics Group analyst Eli Rubin observed in a note to clients Thursday.
“The market is attempting to manage a strong outlook, with record-high June heat possible, compared with near-term spot weakness,” Rubin said. “...While near-term choppy trading may extend, a more bullish outlook beckons in the back half of June.”
Pre-report surveys showed traders and analysts expecting a somewhat lighter-than-average injection in the 80s or 90s Bcf from the U.S. Energy Information Administration’s (EIA) 10:30 a.m. ET storage report.
Responses to a Bloomberg survey ranged from injections of 85 Bcf to 97 Bcf, with a median 92 Bcf build. A Reuters poll produced a 90 Bcf median based on responses ranging from 85 Bcf to 95 Bcf.
NGI modeled a 97 Bcf injection for the latest EIA report, which covers net changes to Lower 48 storage during the week ending May 31. The five-year average injection for the period is 103 Bcf, while the year-ago build was 105 Bcf.
Following a larger-than-expected 84 Bcf injection in the week-earlier period, total Lower 48 working gas in underground storage stood at 2,795 Bcf, or 586 Bcf higher than the five-year average.
“It’s likely to be another volatile session with the EIA weekly storage report on tap,” NatGasWeather said early Thursday. Temperatures during the report period were “warmer than normal over the southern U.S. and eastern half of the U.S., while a touch cool versus normal over much of the West and Northern Plains.”
NatGasWeather predicted an 88 Bcf injection for the latest EIA print, “aided by lighter demand due to the Memorial Day holiday.”
The European weather model added cooling degree days (CDD) to the outlook overnight and was advertising a net increase of 8 CDDs over the prior 24 hours, according to the firm.
Both the American and European datasets “show a hotter U.S. pattern gaining ground June 15-22 as upper high pressure expands to rule most of the U.S. with highs of mid-80s to 100s,” NatGasWeather said.
