Daily Market Update August 6, 2018

Early Morning Update

The Sep18 natural gas contract is trading flat to Friday’s close at $2.85. The Sep18 crude contract is up $0.51 at $69.00.

Summary

On Friday, the August NYMEX natural gas futures price moved up 3.7 cents on the day to settle at $2.853/MMBtu. The upward pressure came after the third consecutive disappointing injection into storage, adding to the concern for the end-of-season storage deficit in comparison to historical benchmarks. The storage deficit continues to remain wide, with the final estimate for this season falling to 3.418 Tcf. U.S. dry production remains at healthy levels as we move through this summer, averaging just over 80 Bcf/d, and reaching an all-time high of 82.0 Bcf/d on July 31st. Recently, China has mentioned that it might enact a 25% import duty on LNG, which could lower overall demand for natural gas and be bearish for pricing. The 1-5 day weather forecast shows scorching heat returning to the West Coast and Northeast markets, not showing any relief for natural gas demand for power generation and air conditioning load. The expectation of continued heat into August has the potential to lower the amount of natural gas to be injected into storage, and continue to put upward pressure on pricing going into this winter.

Market Update 080618