For the second consecutive week, the natural gas market was hit with an EIA report that showed a much higher build than almost all of the market estimates, with today's report showing an injection of 119 bcf compared to market consensus, and our own estimate, of 110 bcf, which again reflected supply / demand balances that were very loose.

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This led to the July contract closing over 5 cents lower, making yet another multi-year low. 

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This begs the question, what is behind the recent misses? It doesn't seem to be the supply side, as we continue to see production failing to get back to its previous highs. 

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But is there more supply out there than is being indicated? We cannot be sure of this, although the extreme weakness in physical cash markets suggests it is a possibility. 

Another explanation could relate to the weather. Last week we discussed the possibility that the 114 bcf build could have been high at least partially due to higher wind generation. That is not as much of a factor in this week's report, but let's dig a little deeper into the week's weather. Here are the daily GWDDs for the week ending 5/31: 

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Focus on the period highlighted in yellow. That was Memorial Day weekend. Some of the week's highest demand happened to fall right on the holiday weekend. This could mean the overall impact of less actual demand due to the long holiday weekend was simply underestimated.