Futures Pricing --
August 13 natural gas opened today at $3.663 and excited trader activity just before noon when the contract moved up to $3.70. From there, short covering shoved the contract off a cliff to $3.58.
Natural gas futures continue to be slave to short positions. Look for volume to carry the keys to this market. Once traders believe a low is in place, they will re-enter and create profits on the ensuing uptrend.
Strong resistance is now at the $3.70 level. A violation of that level would signal upside potential to $3.91. Bears' next target is a break below $3.56, and a decline in consumption this week and will limit upside action until the nation reaches for the thermostat, placing pressure on the national supply.
August natgas settled today at $3.61 all told, dead center in today's range.
Spot Prices --
Natural gas spot prices generally rose over the week, partially reversing losses from the past two weeks. Henry Hub spot prices ended the reporting week at $3.69, up 15 cents from $3.54 on July 3. For the first few days of July, Henry Hub prices remained in the $3.50 per MMBtu range, at their lowest level since March. Big price increases occurred in the Northeast on Friday, July 5, likely on a weekend forecast of hot weather.
In the Marcellus shale, expected pipeline outages led to large price declines before the July 4 holiday. On July 3, prices dropped from $2.44 per MMBtu to $1.08 per MMBtu at Tennessee Pipeline's Zone 4 Marcellus trading point
Total consumption declined slightly during the report week, according to Bentek Energy Services estimates. Declines in the residential, commercial, and industrial sectors were offset by a 0.2% increase in consumption of natural gas for electric power generation, which is the largest consuming sector at this time of year. Regionally, consumption of natural gas for power generation (or, power burn) was mixed.
Working natural gas in storage increased to 2,687 Bcf as of Friday, July 5, according to EIA's WNGSR. The 82-Bcf gain in storage levels was higher than both the 5-year average and year-ago stock changes for the week, which had net injections of 74 Bcf and 34 Bcf, respectively. Despite the large build, current inventories remain 443 Bcf (14.2%) less than last year at this time and 22 Bcf (0.8%) below the 5-year average of 2,709 Bcf.
The net injection was in line with the market expectations, which, on average, were reported to be 81 Bcf. Natural gas prompt-month Nymex futures prices fell over $0.08 per MMBtu to just below $3.61 per MMBtu immediately following WNGSR's release. In the hour following the release, prices remained around this level.
Temperatures in the Lower 48 states were 1.7 degrees warmer than the 30-year normal temperature and 2.1 degrees cooler than the same period last year, and averaged 75.7 degrees for the week, compared to 77.9 degrees last year and the 30-year normal of 74.0 degrees.