Natural gas prices are holding near $3.207 with marginal gains after prices dropped to $3.138 yesterday. However, prices are still sharply lower from the recent high of $3.369 registered on June 15. The change in the weather forecast for June 26-July 5 is keeping some pressure on prices.
Weather forecasting agency, Commodity Weather Group that above-average temperatures are expected in the West, while the rest of the US will see a mix of normal to below-normal temperatures from June 26-July 5. A drop in temperature is likely to reduce Air cooling demand in the US. The producer uses natural gas to generate electricity to meet rising air cooling demand.
Natural gas prices are likely to find support from strong domestic demand in, export demand and increasing electricity production in the US. As per Bloomberg data, gas demand on Monday was 65.5 bcf, up +1.7% y/y and gas flows to US LNG export terminals on Monday were 10.3 bcf, up +15% w/w. Additionally, electricity output in the week ended June 12 rose +8.6% y/y to 87,138 GWh (gigawatt hours).
However, increasing gas production in the US and the increasing number of the active gas rig is likely to keep a cap on prices.
As per Bloomberg data gas production on Monday was up +3.9% y/y at 91.7819 bcf/d. Baker Hughes reported that the number of active US gas drilling rigs in the week ended June 18 rose by +1 rig to 97 rigs, well above the record low of 68 rigs posted in July 2020.
On the inventory front, as per the weekly EIA report, US gas inventories in the week ended June 11 rose +16 bcf to 2,427 bcf, however, inventories are still down -16.1% y/y and -4.9% below their 5-year average.
According to the CFTC Commitments of Traders report for the week ended June 15, net short for {0|natural gas futures}} increased by 5188 contracts to 107696 for the week. The speculative long position gained 23218 contracts, while shorts increased by 28406 contracts.
Natural Gas July month expiry contract is likely to trade firm while above the key support level of 20 days EMA at $3.159and 50 days EMA of $3.031 meanwhile it may face stiff resistance near $3.255-$3.30.