The NYMEX June natural gas futures contract closed 10 cents higher at a $4.505/MMBtu settlement on Tuesday as the market eyed forecasts for above-normal temperatures into June that could curb storage refills.
"What we're seeing is the forecast getting priced in," said Gene McGillian, broker at TFS Energy Futures. "The fundamentals remain tight. So any kind of seasonal demand can be expected to firm things up."
Forecasts show above-normal temperatures across much of the US over the next six to 10 days, with the hottest weather expected from the Rockies into the Midwest and Ohio Valley, with some cities seeing highs about 10 degrees above normal, according to private forecaster WSI.
Those forecasts "would limit the availability for power generators to choose their fuel and mark the end of the shoulder season," said Gelber & Associates analyst Aaron Calder. "The market is spooked on the onset of cooling demand and how that would affect injections going forward."
McGillian said, however, that weather in the second half of June looks more moderate in longer range forecasts.
"I don't think that seasonal demand is strong enough to turn the market around. But given that storage levels are where they are, you don't want to be too short either. So once again, sellers are just kind of sitting here, pinning to $4.50," McGillian said. "It's a weather-driven market."
The contract traded Tuesday between $4.360-$4.512/MMBtu.
The NYMEX settlement is considered preliminary and subject to change until a final settlement price is posted at 7 pm EDT (2300 GMT).
