LONDOON (Commodity Online): US natural gas markets fell steeply throughout Monday's trade, as waning in weather support reveals a weak underlying balance. The prompt month dropped 11 cents to $4.65/MMBtu and the forward curve also took a sizable hit.
Calendar 2011 dropped 11 cents to $4.77 and calendar 2012 lost 8 cents to $5.04. The market lost recent support as temperatures have moved lower from last week's record highs to more normal levels and as the underlying balance, absolute temperature extremes, is weak.
Another temporary support for the market, high levels of nuclear outage, are also receding as a factor for bullish sentiment as generation levels have climbed back to 92 GW and are roughly at y/y parity.
The lowest levels for nuclear generation were in early May at only 68 GW. Natural gas production levels continue to keep the market in check, and in this respect, a steady rig count just below 900 should continue to grow production and loosen the balance between supply and demand.
Temperatures still have the ability to swing sentiment wildly. Although the forecast for June is consistently warmer than normal, a reversion back to normal for the balance of summer would achieve another record storage finish, in our view.
Cash prices were mixed with Henry Hub up 3 cents to $4.75, SoCal Border up 13 cents to $4.76, and Transco Zone-6 NY down a cent to $4.95.
