Tightening Balances Helps Gas Bounce

Natural gas prices canceled out yesterday's decline almost perfectly, rallying a percent and a half on the day to settle a tick above where they settled Monday. 

The whole strip got in on the rally, with the front of the strip barely logging the largest gain on the day. 

Initially prices received some support from overnight weather forecasts which added back some GWDDs. 

We noted balance improvements in our Note of the Day as well that became more apparent later in the day along the natural gas strip, with the V/F October/January spread barely moving on the day. 

Helping balances recently have been LNG exports that, while off April highs, are still far more elevated than they were for much of May and the start of June. 

Traders are also focusing on the storage injection to be announced by the EIA tomorrow. Tomorrow's print includes the July 4th holiday, which typically includes a significant amount of holiday demand destruction. The result is a 5-year average that is solidly above last week's, though last year we saw a slightly smaller injection even with the holiday. 

Yet heat was intense enough to ensure that the injection to be announced tomorrow will be solidly smaller than the one announced in the previous week, with our weather-adjusted modeling showing power burns not loosening quite as much as we had expected around the holiday as well. 

There is a rather wide range in estimates for the print tomorrow, and after today's reversal it is quite likely that the print will help determine the natural gas direction for the remainder of the week.