05/02/2018: June Gas Pressured by Bearish Fundamentals Overnight

May 2nd, 2018

After ending the prior session with a 3.9-cent gain at $2.802/MMBtu, NYMEX June natural gas futures lost footing overnight ahead of the Wednesday, May 2, open, amid overriding fundamental weakness. At 10:45 a.m. ET the contract was 4 cents lower at $2.76/MMBtu.
Natural gas inventories are expected to begin rebuilding after a prolonged withdrawal season that continued throughout much of April, which is typically considered the first month of injection season. Storage levels have drawn lower by 73 Bcf thus far in April, leaving total working gas stocks at 1,281 Bcf, or 897 Bcf below the year-ago level and 527 Bcf below the five-year average of 1,808 Bcf as of the week ended April 20.
For the next storage report week ended April 27 that is due out from the U.S. Energy Information Administration at 10:30 a.m. ET on Thursday, May 3, preliminary estimates call for builds spanning the upper 40s Bcf to the upper 50s Bcf. That would compare with a 68-Bcf prior-year injection and a 69-Bcf five-year-average addition.
Anticipated weather and production levels feed support for a healthy pace of inventory rebuilding going forward.
The National Weather Service sees above-average temperatures gripping a majority of the country through both the six- to 10-day and eight- to 14-day periods. Average temperatures scattered over parts of the eastern U.S. and Gulf Coast in the shorter-range view shrink in scope in the extended period to be contained to a few areas of the east-north-central U.S. and the southern tip of Texas, as below-average temperatures initially confined to Michigan and southern Texas eventually disappear from the outlook.
Predominantly warmer weather should erase demand for heating, while a ramp-up in cooling demand should be met by ample supply as rig count data supports outlooks for an increase in natural gas production.
Analysts with the American Gas Association said builds through the injection season should drive inventories to between 3.5 Tcf and 4.0 Tcf by the end of October.

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