Commodities
US Natural Gas Update: Prices Rise as July Comes into Focus
US natural gas futures rose as of midday Wednesday, with the June contract facing expiry and the July contract rolling into the front month.Both the front-month July Henry Hub contract and the continuous contract rose by 4.02% to $3.131 per million British thermal units.The move came alongside signs of tighter near-term fundamentals. Average Lower 48 production slipped to 109.4 billion cubic feet per day so far in May, down from 109.8 Bcf/d in April, according to Trading Economics.Combined with firmer demand, the shift has eased the storage surplus to about 6% above normal, from roughly 7% a week earlier, Trading Economics said.Inventories remain 1.4% above last year and 6.6% above the five-year average. The market is pricing a 95 Bcf injection for the week ended May 22, which would leave stocks 147 Bcf above the five-year norm and 24 Bcf above year-ago levels, NRG Energy said.The US Energy Information Administration is scheduled to release the data on Thursday.Weather forecasts show bearish demand signals. Cooler-than-normal conditions are expected across Texas, much of the Southeast and the Mid-Atlantic in the near term, while below-average temperatures are also seen across California through May 30 and the Eastern US from May 31 to June 4, which could cap air-conditioning demand and support storage builds.Demand has also eased slightly, averaging 93.5 Bcf/d year-to-date versus 94.6 Bcf/d in the same period last year, NRG said.Flows to LNG export terminals rose to about 18.2 Bcf/d on Tuesday, up roughly 8% over the week as several plants returned from maintenance that had temporarily boosted domestic availability, Trading Economics said.LNG exports are expected to average 17.5 Bcf/d over the next two weeks, below the year-to-date average of 18.2 Bcf/d, consistent with seasonal maintenance patterns, it added.Rabobank analysts, as cited in the Wall Street Journal on Wednesday, said that the European gas market is underpricing risks from tight LNG availability and weak storage injections this summer.Europe remained the dominant destination for US LNG, taking in 355.7 Bcf, or 62% of total in March, EIA said Wednesday.Rabobank said lower inflows could leave European inventories unusually low heading into winter, raising shortage risk.Rabobank expects TTF prices to average about 60 euros ($69.77) per megawatt-hour in Q3 and climb toward 69 euros/MWh by year-end from roughly 46 euros/MWh currently, with normalization unlikely before 2028 when new US and Qatari LNG capacity comes online.