Another weak day of trade in the natural gas market although the market staged a light recovery into the close helping to mitigate some of the early day losses.
The front month August 15 contract lost an additional .040 or 1.4% today falling to a new one month low at 2.688.
Hotter weather forecasts have failed to stem selling pressure which is not a good sign for the bulls in the heart of the summer cooling season.
Focus has again shifted to production which reached a record high of 74.69 Bcf per day last December which was nearly reached again in April hitting a 74.63 daily high according to recently revised EIA estimates.
The problems with the EIA's production data is that it is several months old, almost worthless for today's trade. No one really knows when production may begin to decline. The natural gas rig count is hovering above an all-time low of 217 currently estimated at 221 last Friday by Baker-Hughes. The crude oil rig count has also fallen 28 out of the past 29 weeks which at some point will lower associated gas production from the crude oil side.
The past two weekly EIA storage reports have come in lower than expected but that could be a result of higher summer cooling demand rather than falling production.
Once the backlog of already drilled wells is worked out of the system, the falling rig count might finally make a difference. It is difficult to predict when that may occur, but it could become a factor later this year.
Over the next few months, there is a strong possibility for the spot natural gas contract to trade back toward the lower-2.000 level if storage injections remains as high as they have been during this current injection season. The market is on track for storage to possibly top the 4,000 Bcf level later this year for the first time ever surpassing the 2012 record high for peak storage of 3,929 Bcf.
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