Natural Gas Storage Build Keeps Sellers in Control Despite Heat

September natural gas futures touched a multi-month low Thursday and were treading water Friday, trading at $2.643 at 12:00 GMT, up $0.003 or 0.11%. The EIA reported a 33 Bcf storage build for the week ended July 31, above the 30 Bcf estimate and the five-year average of 23 Bcf. Inventories now sit 6.7% above the five-year seasonal norm. Sellers are in control.

Storage data stopped a weather-driven bid before it could build. NatGasWeather sees most of the country running hot to very hot over the next seven days, with highs in the upper 80s to 110s. That outlook should lift cooling demand and gas-fired power burn. The injection report says the heat has not mattered yet.

Cash prices gave the same signal. Physical gas weakened for Friday delivery. Heavy losses in New England erased the prior session's weather premium. Heat showed up on the forecast. It did not produce the kind of demand stress that forces buyers to chase futures higher. The market is treating the heat as temporary until it holds across the Midwest and Northeast long enough to change the storage math. The short-side setup is covered in Natural Gas: 207K Shorts Face Heat Test as Front-Month Holds Support.

Permian Supply and the Export Bid

Production averaged 111.2 Bcf per day Thursday, up 1.8% from a year ago. The rig count of 127 sits below February's high. It remains high enough to keep output near current levels. Production does not have to surge for prices to struggle. Output just has to stay near current levels while storage keeps building above average.

Buyers face a heavier calendar from September 1, when the Hugh Brinson pipeline reaches full capacity at 1.5 Bcf per day. More Permian gas arrives at Henry Hub just as the summer cooling season starts to fade. The supply side is getting heavier at exactly the point when demand normally starts losing its grip.