The Weekly Natural Gas Market Newsletter

July 5, 2021

Natural Gas News & Notes

The July NYMEX 2021 contract expired at $3.617 on Monday 6/28. The contract gained an impressive 59 cents or 19.5% since taking over as the prompt month contract on 5/27. The contract was support by some extremely warm weather that spurred early power generation demand as well as strong exports from both LNG needs and pipeline exports to Mexico. Gains were also attributed to some sub-weekly storage injection levels that have added to inventory deficits to both year-ago levels as well as the previous 5-year average.

The August 2021 NYMEX natural gas contract has now taken over as the prompt month contract. The contract has already posted a pre-4th of July holiday high of $3.814 before settling at $3.70 heading into the long holiday weekend. When traders return on Tuesday, all eyes will be on Tropical Storm Elsa. While briefly obtaining hurricane category 1 status, the storm has been downgraded as its movement over Jamacia has weakened it slightly. The storm is currently forecasted to hit Cuba on Monday and then enter the Eastern Gulf of Mexico on Tuesday morning. The storm is eyeing the Florida Gulf coast as a likely target area. This is far enough away from natural gas related activities in the Western Gulf that as of now, impacts to natural gas production should be a non-factor.

The storm could be more of a power generation demand destroyer as it moves in-land across the Southeast this week. This in turn could pressure NYMEX futures a little bit lower. Should a dip in prices be seen, it is advised that hedging exposure to August be considered. The contract is set-up to eventually test the $4.00 price level as fundamental price driving factors remain very bullish for natural gas futures. Support levels at $3.43 then at $3.27 would be deemed as excellent buying levels. Resistance is seen at the psychological $4.00 level then at $4.25.