The bullish trend in natural gas shows no signs of stopping, as the fuel’s futures approach the significant $3 threshold in Monday’s trading session. This surge is driven by the anticipation of warmer temperatures, which are expected to prompt Americans to rely more heavily on their air-conditioners throughout the summer months.
On the New York Mercantile Exchange, the front-month gas futures contract at Henry Hub concluded with a 4.9-cent, or 1.7%, increase, settling at $2.89 per mmBtu (metric million British thermal units). At its peak during the session, it reached $2.936, a level not seen since March.
According to analysts at Gelber & Associates, an energy markets advisory firm based in Houston, the primary driving force behind this upward movement is the heatwave affecting numerous Southern states, along with revised near-term forecasts indicating warmer weather.
Gelber’s analysts note that temperatures in the South have already exceeded 100 degrees Fahrenheit earlier than anticipated, and the heat is expected to spread across the entire lower 48 states in the coming weeks.
“The growing power demand resulting from both realized and projected forecasts is providing strong fundamental support for the ongoing rally. As the warm weather persists, this rally may soon test the resistance level at $3 per mmBtu,” stated Gelber & Associates in a client note.
Natural Gas Continues Longest Winning Streak since Q1 2022, Surpassing Storage Expectations
Despite the U.S. Energy Information Administration (EIA) reporting higher-than-expected storage figures for natural gas in the most recent week, the market has experienced an intriguing period with bulls maintaining their dominance for four consecutive weeks. This marks the longest winning streak since the first quarter of 2022.
During the past week, natural gas storage witnessed an increase of 95 billion cubic feet, surpassing the industry analysts’ forecast of 88 billion cubic feet for the week ending June 16, as tracked by Investing.com. The majority of analysts’ estimates for the build-up ranged from 84 to 91 billion cubic feet.
In the preceding week, utilities injected only 84 billion cubic feet into storage after consuming gas to fulfill power generation and cooling requirements.
Comparatively, the 95-billion cubic feet build-up for the current week exceeds the 76-billion cubic feet injection recorded during the same period last year and surpasses the five-year (2018-2022) average increase of 86 billion cubic feet.
This build-up brings the total volume of gas stored in underground caverns across the United States to 2.729 trillion cubic feet (tcf), marking a 26.5% increase from the level observed a year ago (2.158 tcf) and a 15.3% rise above the five-year average of 2.367 tcf.
With a nearly 28% gain throughout June, gas futures at Henry Hub are on track to achieve their most successful month in nearly a year. The last time the market witnessed a comparable monthly rally was in July, which resulted in a 46% increase.
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