Natural gas holds to big June gain as another storage data release looms

Investing.com -- Caution is the new watchword in natural gas — caution against the lows that is.

With a near 15% gain for June, gas futures on the New York Mercantile Exchange’s Henry Hub are headed for their best performance since August — the month they hit a 14-year high of $10 per mmBtu, or metric million British thermal units.

While summer weather hasn’t hit its typical baking point across the country, cooling demand is inching up by the day — sparking the realization in the trade that higher price lows might be more common from here than new bottoms. The lowest Henry Hub’s front-month got to this week was $2.448, versus the $2.136 bottom seen at the start of June.

On Wednesday, the front-month contract settled up 10.5 cents, or 4.2%, at $2.597, after a 14-cent, or 5.3%, tumble, in the previous session to $2.49.

The consolidation from the slide came despite estimates for gas storage in the latest week to June 16 showing a relatively high build of 88 billion cubic feet. In the previous week, there the gain was just 84 bcf versus a forecast of 96 bcf. Only in two prior weeks, the build was above 100 bcf, the target desired by gas bears.

“After last week’s surprise storage injection on the bullish end of the spectrum, market participants are again shifting expectations to a more cautious outlook,” Houston-based energy markets advisory Gelber&Associates said in a note to its clients in natural gas. “Fear of another rally from storage is fresh in the minds of these participants and as heat begins to materialize, storage injections are likely to temper going forward.”

Bigger gas storage build forecast; Bulls take estimate in stride

The 88-bcf build for last week, forecast by industry analysts, compares with a 76 bcf injection during the same week a year ago and a five-year (2018-2022) average increase of 86 bcf.

The U.S. Energy Information Administration will report on Thursday the official storage number for the week ended June 16.

Reuters, meanwhile, cited 52 cooling degree days, or CDDs, last week, from data collated by its research arm Refinitiv. That compared with the 30-year norm of 63 CDDs for the period.

CDDs, used to estimate demand to cool homes and businesses, measure the number of degrees a day's average temperature is above 65 degrees Fahrenheit.

Prior to June’s run-up, gas prices hit lows beneath $2 from benign weather that created little need for either heating or cooling. On top of weak demand has been robust production of the fuel, which has steadily added to the glut in gas supply.

A year ago, the benchmark gas contract on the Henry Hub was trading at between $7 to $8 per mmBtu, hitting a high of $10 in August on fears of a supply squeeze heightened triggered by the Russia-Ukraine conflict.