EBW Analytics: NYMEX Front-Month Leaps Above $4.00/MMBtu
The July natural gas contract traded as high as $4.148 this morning—a 56.7¢ (+16%)
surge over the past week—as a searing heat wave piqued bullish enthusiasm, reshaped
technicals in a bullish direction, and refocused the market on structural tightening. Henry
Hub spot prices also jumped to the highest levels since mid-April.
Daily cooling demand may soar another 4.4 CDDs into Tuesday. The return of the two
train maintenance outage at Sabine Pass, initial startup at Corpus Christi Stage 3 and even
LNG Canada may further increase upside into next week's contract rollover.
Turbocharged bullish momentum may recede into late summer. Weather forecasts for
early July will be critical to sustaining upside. With building bullish catalysts yet to be fully
realized and technical momentum to the upside, chances for further gains remain possible
if July can close above $4.09. Still-dragging Henry Hub cash prices illustrate downside
potential, however, with a volatile week likely ahead for natural gas prices.
Significant Developments
Summer arrived in a hurry. The June natural gas narrative is shifting in the final third of the month as heat rapidly arrives, LNG is poised to
launch higher as Sabine Pass returns next week, and Henry Hub spot market dynamics flip. After a bearish beginning, June 2025 may
now become the third hottest on record. Henry Hub spot prices shot higher 58¢/MMBtu to $3.48/MMBtu—50¢ behind the July contract
close—with still-to-drop anticipated catalysts with the brunt of the heat wave and the likely return at Sabine Pass ahead early next week.
Less-anticipated bullish catalysts may include new LNG exports at LNG Canada or a third midscale train at Corpus Christi Stage 3. The
meteorological setup into July remains bullish as well.
Still, the high-level fundamental outlook has shifted far less than prices. Week 1 will be scorching, but hotter than the first third of July.
Texas and the South Central remain generally mild, limiting regional impacts. Weekly production is up 1.0 Bcf/d from earlier this month and
may continue higher into midsummer as lingering pipeline maintenance concludes. Storage remains on track to near 3,865 Bcf in the most
likely scenario—hardly an alarming figure. Earlier this year, storage was on a trajectory towards 4.2 Tcf—a level the market would not
tolerate and eventually “force” a bearish correction lower. Storage near 3,865 Bcf, by contrast, is perfectly reasonable and lacks the same
long-term bearish conviction. While we favor a correction lower into late summer, the lack of the bearish “forcing function” from an
unsustainably high storage trajectory reduces our conviction in the probability of an ultimate late-season retreat lower in NYMEX futures.
Dan Steffens
Energy Prospectus Group |
