The NYMEX June natural gas futures contract traded marginally higher Wednesday on expectations of power sector demand and concerns about gas storage levels ahead of the summer cooling season.
The front-month contract traded 0.6 cents higher, settling at $2.914/MMBtu after moving between $2.898/MMBtu and $2.939/MMBtu Wednesday.
Tuesday "the market broke out and pushed up to levels 10 cents above the highs we have seen in the past three months," said Gene McGillian, senior analyst at Tradition Energy.
Gas has been trading in a $2.65/MMBtu-$2.85/MMBtu range since March, according to S&P Global Platts Analytics data.
The market is concerned about below-five-year-average storage levels and power sector demand because of early cooling demand during the injection season. Weather-related demand is expected to have driven a marked drop in the rate of storage injections.
A consensus of analysts S&P Global Platts surveyed expects a 93-Bcf injection for the week that ended May 18, down 12% from the 106-Bcf build announced for the week that ended May 11, but up 4% from the 89-Bcf build averaged over the past five years, according to Energy Information Administration data.
"Even though we have seen high injections in the past weeks, storage levels are still 25% below the five-year average," McGillian said.
According to the most recent EIA data, national gas stocks are at 1.538 Bcf, down 24.6% from the five-year average of 2.039 Bcf.
Total demand increased Wednesday to 70.6 Bcf/d, a 500 MMcf jump from the day prior according to Platts Analytics data. The biggest increases came from the Northeast, Southeast and Southwest, which offset the drop in the Midcontinent Market and Texas because of cooler weather Tuesday.
Demand is estimated to rise in the coming weeks likely because of early onset of heat with Platts Analytics projecting a demand of 71.5 Bcf/d over the next seven days and 73.5 Bcf/d over the next eight to 14 days.
Dry gas production dropped 1.1 Bcf Wednesday to 77.1 Bcf because of maintenance-related projects. Platts Analytics estimates production to rise to 77.8 Bcf/d over the next seven days likely because of a warmer weather outlook.
The most recent six- to 10-day weather forecast form the National Weather Service shows above-average temperatures for much of the country except for the Southeast, which is expected to experience temperatures within the normal range.
