June 11 2024 Market Update

Another bullish day 

The NYMEX contract achieved a high of $3.147 US/mm, basically the same level as May 23rd before it then started selling off.  The rest of summer strip trading up to $3.195, which was above the May 23rd high.  Winter 24-25 has a similar chart with the high of $3.895 not seen since December 2023.  Summer 2025 traded up to $3.527. Winter 25-26 traded up to $4.222 and is the only chart that is still inside it’s range.

Everyone is looking at the hot weather and the resulting cooling demand to explain this bullish price action.  Cooling degree days are up again and projected cooling demand is forecast to increase from 35.4Bcf last week to 40.4Bcf next week.

So far this month, producers have not increased production significantly so instead prices have responded.

Looking ahead to Thursday’s storage report, preliminary indications are for an injection of 75 Bcf into storage as compared to +98 for last week.  A year ago was +90 and the five year average is +89.  A lot of people are talking about how storage levels are now only 25% over the five year average, but last month it was more than 30%.  This figure is slowly marching down and some feel this is a bullish signal. This is like measuring the tallest kid in the class on % terms over five years; he is not getting shorter but rather the other kids are growing up and he is still the tallest kid in the class.

I’m not so sure this is a bullish signal because we cannot overfill storage.  We still have to contend with the maximum capacity.  You can’t put 100 liters of gas in your car if the tank only holds 80 liters.  If we only achieve the five year average in October, we will still end the summer with a lot of gas in the ground.  I’m not saying we are going to sell off from here but I am questioning some of the logic of some of the super bulls reaching for any justification. 

The weather will be hot this summer and there is already talk of hurricanes.  20 years ago when most of the natural gas came from off shore rigs in the Gulf of Mexico, a hurricane was a major issue.  They would have to shut in production and evacuate the rigs in the path of the storm and this would cause a bullish spike at NYMEX. However, today most natural gas comes from on shore production, which is immune to a hurricane. 

But don’t forget what happens once a hurricane hits shore (other than the horrible destruction), the storm will bring a ton of rain onshore that will lower temperatures and cut cooling demand (for a period of time).  So we might see a counterintuitive fall in prices as a result.

Stay cool out there.  [WFG]

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