Commodities▼ Bearish
Natural Gas: 32 Bcf storage build stalls rally at range top
Natural gas slipped 0.93% as a 32 Bcf storage build halted short-covering at $2.991. Next catalyst: early August heat expanding east, traders said.
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Natural gas futures slipped Friday after a larger-than-expected storage build from the EIA halted a short-covering rally at the top of the two-week range. August contracts settled at $2.889, down 0.93%, after touching an intraday high of $2.991 ahead of the report Thursday. The 32 Bcf injection for the week ending July 17 came in above the 29 Bcf consensus estimate and near the five-year average, several traders said.
Working gas inventories sit at roughly 3,056 Bcf, running 6.4% above the five-year average. The injection was smaller than the 61 Bcf build from earlier this month. Summer power burn is absorbing some supply. The surplus is not shrinking fast enough to shift the market's direction, traders said.
Short-covering had pushed futures to the range top before the report. A near-consensus build does not give bulls enough ammunition to break through resistance when the five-year surplus remains this wide, traders said.
LNG feedgas demand has been running at roughly 17.5 Bcf per day, below the peak summer pace closer to 19 Bcf per day. Freeport maintenance and uneven Gulf Coast operating rates are holding flows back. Corpus Christi has been running stronger nominations, helping offset some of the weakness. One terminal improving does not change the picture when total export demand is running below recent highs, traders said.
Tropical Storm Bertha has not caused a major outage. The threat is keeping traders from pressing long into a weather rally, traders said. Any disruption to Gulf Coast LNG facilities traps more gas in the domestic system. The timing works against bulls trying to build a case that demand is catching up to supply.
High pressure is expected to keep much of the country hot through July 29, with widespread highs in the upper 80s to 100s Fahrenheit. Texas is doing the heavy lifting because ERCOT load has been hitting records and gas-fired power demand climbs fast when that heat holds. Lower-48 demand was running at 80.6 Bcf per day earlier this week, up 6.3% from a year ago.
The Midwest, Great Lakes and Northeast are getting periodic breaks with showers and temperatures in the 70s and 80s moving through regions that need to participate for national power burn to surge. That keeps demand in the moderate-high range instead of pushing it into the kind of broad sustained pattern that forces shorts to cover above $3, traders said.