Natural gas futures are exploding during the quiet Memorial Day trading session. Following a couple of down days last week, the energy commodity is extending its gains from Friday, staying above the critical $3 threshold. What is driving the turnaround in natural gas prices to kick off the trading week?
July natural gas futures surged $0.0598, or 1.98%, to $3.045 per million British thermal units (btu) at 14:03 GMT on Monday on the New York Mercantile Exchange. Natural gas is coming off a 3% weekly and the energy commodity will post a 3% monthly gain. Year-to-date, natural gas is up more than 20%.
Natural gas is primarily recovering on stronger export volumes. Liquefied natural gas (LNG) shipment levels have rebounded in recent days, topping 11 billion cubic feet per day and bringing it to record levels. Even with maintenance work impacting operations, demand is still strong.
These numbers have eased concerns about national cooling demand. But are these fears about a lackluster summer heatwave subsiding?
Bespoke Weather Services issued its 15-day forecast on Friday, highlighting that it could be a much warmer June as the month ventures on. Does this mean the oppressive heat is back on the table this summer?
“Cooling demand jumps back above normal and remains there through day 15, and likely beyond, given the current depiction from all the latest model guidance. This continues to increase the odds of a hotter June, which has been our idea for a long time, though we do expect some variability mixing in at times.
It is uncommon to see pure weather trading be a successful strategy in summer, as opposed to winter, and the supply/demand balance is undeniably a good deal weaker than it had been for all of April and into early May.”
At the same time, investors have been monitoring the weekly Energy Information Administration (EIA) storage reports. Last week, the domestic inventories advanced 115 billion cubic feet, coming in higher than the median estimate of about 107 billion cubic feet.
Industry observers warn that the next two to three storage reports will be crucial for natural gas prices heading into July.
In other energy commodities, July West Texas Intermediate (WTI) crude oil futures soared $0.93, or 1.4%, to $67.25 per barrel. August Brent crude futures picked up $0.93, or 1.38%, to $69.67 a barrel. July gasoline futures increased $0.0216, or 1.01%, to $2.1585 per gallon. July heating oil futures rallied $0.0212, or 1.03%, to $2.0592 a gallon.