Slowed Momentum in Gas Pricing
Gas pricing may not surge to $3 just yet, as US weather forecasts indicate a cooling down of the recent three-week heatwave. This temperature fluctuation casts a shadow of uncertainty over the future trends of gas prices.
Activity and Setbacks in the Natural Gas Market
On the New York Mercantile Exchange's Henry Hub, the active natural gas contract for August fell 1% or 2.7 cents, settling at $2.609 per metric million British thermal units (mmBtu). This led to an 8% weekly drop for the benchmark gas futures contract, marking its first weekly downturn in five weeks.
New Lows and Highs in Gas Pricing
The dip in August gas on Friday, hitting a low of $2.543, saw its return to mid-$2 levels after two weeks. Conversely, at the beginning of the week, August gas reached a high of $2.936, the most substantial level for a front-month gas contract on the Henry Hub since March.
Impact of the Weekly Gas Storage Report
The fall in natural gas prices also came on the heels of the weekly gas storage report by the US Energy Information Administration (EIA). It displayed a higher-than-projected build of 72 billion cubic feet (bcf), surpassing industry analyst expectations.
Predictions vs Reality in Gas Storage
Industry insiders tracked by Investing.com had anticipated US utilities would add roughly 64 bcf to storage in the past week, mirroring the previous year's figures and the five-year average increase. However, the actual addition turned out to be significantly higher, with 76 bcf added to storage the week before.
Easing Heatwave and Its Effects
With the receding heatwave in Texas and the southern US, the demand for air-conditioning and power burn diminished, contributing to the dip in gas prices. The cooling demand in these regions had triggered a 24% spike in natural gas, its most significant monthly rally in nearly a year.
Weather Impact Across the US
While areas like New York, California, and other states along the Eastern US and West Coast experienced temperature hikes, the transition wasn't drastic enough to offset the reduced demand from the South's cooling trend.
Analysis from Energy Market Experts
Analysts from Houston-based energy markets advisory, Gelber & Associates, pointed to a widespread drop in demand reflected in the 2.9 bcf/d fall in power burn. They noted that this outweighed changes in fundamentals, including a 0.9 bcf/d and 0.45 bcf/d increase in ResComm and production respectively. 'ResComm' refers to the three major natural gas market segments: power generation, industrial, and residential plus commercial demand.