Early July Heat Leads To Strong July Nat Gas Contract Expiry

The July natural gas contract went off the board with a sizable rally, thanks in part to very impressive heat expected to start the month of July. 

The July contract went off the board at $2.996, just 4 ticks from our $3 expectation this morning and following in line with our expectations from our Afternoon Update yesterday that prices would see strength into expiry. 

 

The July contract clearly led the rest of the strip higher into expiry, with later contracts lagging further behind. 

Strong cash prices have played a significant role ahead of heat that should be very impressive for the first week and a half of July. 

We have been warning clients about this heat for more than a week. Our Note of the Day from June 19th explained why what was then Week 3 heat would bring a natural gas rally. The heat was intense enough that we have seen two; one last Wednesday/Thursday and another today. 

The heat can be seen to have significantly narrowed N/V in the last couple of weeks as well. 

Attention now turns to tomorrow's EIA data, where estimates range for the injection from anywhere in the low 60s to the mid 70s. In our Afternoon Update we broke down our expectation for price action into the print following today's expiry, as well as where price risk appears skewed post-print and what we expect the number to show about current balance in the natural gas market.