Natural gas prices swung in a .100 intraday trading range on Tuesday but closed only slightly higher with late day buying coming into the session's close.
The market remains near a 3-week price high at the lower-2.900 level basis the spot July 15 contract buoyed by hotter weather forecasts in the southeastern U.S., a tropical storm in the Gulf of Mexico production area and hedge fund buying.
Weather demand by power generators has been increasing as the first two weeks of June have been hotter, possibly one of the top 5 hottest months on record if current forecasts into the end of the month prove correct. But it is questionable as to whether or not this demand will decrease storage injections which for 10 consecutive weeks have surpassed the 5-year average. The 132 Bcf injection two weeks ago was one of the largest on record with current injections of 843 Bcf over the past 10 weeks exceeding the 5-year average by 36%.
If weather remains hot, and storage injections begin to fall, natural gas prices could see continued near term strength. But the market will likely struggle at the 3.000-3.200 level as it has since mid-February. And if injections don't start to fall, there could be a record amount of gas in storage at the end of October when the current injection season ends. The record high for end of October storage is 3,929 Bcf reached in 2012. This year's current storage of 2,344 Bcf is on pace to exceed 4,000 Bcf for the first time ever.
If storage injections remain high, a final price low is expected later this year which seasonally tends to form during the months of August or September.
Given the drop in both the crude oil and natural gas rig count which last week fell to 221, market lows, wherever they may form, could be a multi-year low for natural gas prices.
No comments:
Post a Comment