As Another Storage Data Release Approaches, Natural Gas Maintains Its Large June Gain.

Introduction

In recent times, natural gas futures on the Henry Hub of the New York Mercantile Exchange have experienced significant gains. As another storage data release approaches, the market is eagerly anticipating the results. This article delves into the current state of natural gas, highlighting its performance in June and the factors influencing its prices.

June Gains and Historical Context

Gas futures on the Henry Hub have had a remarkable month, poised to achieve their highest performance since August. Back then, they reached a 14-year high of $10 per MMBtu (metric million British thermal units), recording a gain of approximately 15%. This surge in prices has caught the attention of market participants, who are beginning to recognize that higher price lows may be more prevalent moving forward.

Price Fluctuations and Summer Heat

Despite the absence of scorching summer temperatures across the nation, natural gas prices remain relatively stable. Henry Hub’s front-month hit a low of $2.448 this week, showing a slight increase compared to the beginning of June when it reached $2.136. Although the front-month contract experienced a temporary dip of 14 cents or 5.3%, it managed to bounce back, closing at $2.597 with a 4.2% increase.

Gas Storage Projections

The recent projections for gas storage ending on June 16 indicated a substantial increase of 88 billion cubic feet (bcf). Although this growth rate was slightly lower than the previous week’s gain of 84 bcf (compared to the expected 96 bcf), it remained above the targeted 100 bcf mark. However, Houston-based energy markets adviser Gelber & Associates warned their clients about the potential for a bullish storage injection, prompting a shift in expectations towards a more cautious outlook.

Larger Gas Storage Construction Forecast

Industry analysts predicted a significant increase of 88 bcf in gas storage for the previous week, surpassing the 76 bcf injection during the same period last year. Moreover, the average increase in storage over the past five years (2018-2022) stood at 86 bcf. The official storage figure for the week ending June 16 will be released on Thursday by the U.S. Energy Information Administration.

Cooling Degree Days

Data compiled by Reuters’ research division, Refinitiv, reveals that 52 cooling degree days (CDDs) were recorded last week. This number represents a contrast to the 30-year average of 63 CDDs during the same period. CDDs measure the number of degrees the daily average temperature exceeds 65 degrees Fahrenheit and are used to evaluate the demand for cooling residential and commercial spaces.

Impact of Weather on Demand

Prior to the sudden spike in June, petrol costs dropped to around $2 due to mild weather conditions, resulting in reduced demand for heating and cooling. Despite the low demand, strong fuel output has contributed to an increasing surplus in petrol supply. This surplus, combined with concerns over supply crunches triggered by the Russia-Ukraine conflict, has led to fluctuations in natural gas prices.

Conclusion

As the upcoming storage data release approaches, the natural gas market continues to maintain its large June gain. With notable increases in gas futures and stabilizing storage figures, market participants are adopting a more cautious outlook. The interplay between weather patterns, demand fluctuations, and geopolitical tensions will shape the trajectory of natural gas prices in the coming weeks.

FAQs (Frequently Asked Questions)

1. Q: What is the significance of the storage data release for natural gas?
   • A: The storage data release provides insights into the inventory levels of natural gas, which can impact market prices and supply-demand dynamics.
2. Q: How do cooling-degree days affect natural gas demand?
   • A: Cooling degree days reflect the need for cooling in residential and commercial spaces. Higher CDDs often indicate increased demand for natural gas as an energy source for air conditioning.
3. Q: What factors contribute to the volatility of natural gas prices?
   • A: Natural gas prices can be influenced by weather patterns, geopolitical tensions, supply-demand dynamics, and global energy market trends.
4. Q: Why are market participants adopting a cautious outlook regarding natural gas?
   • A: Recent surprises in storage injections and concerns about another rally in storage have prompted market participants to approach the market with caution.
5. Q: How does natural gas performance in June compare to previous months?
   • A: Natural gas futures in June have shown significant gains, positioning this month as one of the best performances since August.