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Commodity futures

Natural Gas Futures Close Marginally Higher Despite Crude Oil Prices Decline

Strategic Insights

— 2 min read

Natural gas futures on the New York Mercantile Exchange ended the day marginally higher, overcoming an initial decline of as much as 10 cents, as traders shrugged off a decline in crude oil prices. The growth in natural gas futures can be attributed to a combination of factors, including weather forecasts indicating a significant warming trend towards the end of the 8- to 14-day forecast period, a bullish reading from the Edison Electric Institute on electric generation demand, and a upcoming gas storage report by the Energy Information Administration. Meteorologists at Weather 2000 released a report calling for periodic heat waves through August in the western, southern, and eastern regions of the country, which contributed to the market's turnaround.

Key Takeaways:

  • Natural gas futures on the New York Mercantile Exchange closed marginally higher despite a decline in crude oil prices, with July futures settling a third of a cent higher at $6.415 per million British thermal units.
  • The July natural gas futures price increase can be attributed to bullish weather forecasts and a bullish reading from the Edison Electric Institute on electric generation demand.
  • The Edison Electric Institute reported an increase in electric generation demand, which contributed to the market's turnaround. Meteorologists at Weather 2000 also released a report calling for periodic heat waves through August in the western, southern, and eastern regions of the country.
  • The upcoming gas storage report by the Energy Information Administration is expected to show a rise in inventories of 87 billion cubic feet for the week ending June 18, according to a Dow Jones survey.
  • The range of predictions for the gas storage report was fairly wide, ranging from a build of 79 billion cubic feet to a build of 100 billion cubic feet, with a median expectation of a build of 87 billion cubic feet.
  • Physical prices were mixed to slightly higher across the country due to the midday recovery in futures prices on more bullish weather forecasts. The benchmark Henry Hub rose from its lows of the day as futures prices recovered but its range was barely changed versus Tuesday at $6.24-$6.37.
  • A bearish inventory report and the resumption of more Iraqi exports following last week's pipeline sabotage pushed August crude futures down 68 cents.

Statistics:

  • The July natural gas futures price increased by a third of a cent to $6.415 per million British thermal units.
  • The range of predictions for the gas storage report was from 79 to 100 billion cubic feet, with a median expectation of 87 billion cubic feet.
  • August crude futures decreased by 68 cents due to a bearish inventory report and the resumption of more Iraqi exports.
  • Physical prices were mixed to slightly higher across the country, with the benchmark Henry Hub rising from its lows of the day.

Sources:

  • ODJ via COMTEX (Dow Jones)
  • Weather 2000
  • Edison Electric Institute
  • Energy Information Administration
  • Dow Jones Newswires
  • COMTEX (http://www.comtexnews.com)

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