The June natural gas contract settled down just a tick on the day but rallied 3.2% over the past week as very hot forecasts across the country over the next two weeks have continually increased demand expectations.

As seen in today's updated Climate Prediction Center 6-10 Day forecast, heat across the South remains at very high confidence with essentially the entire country looking to be warmer than normal.

Expectations of significant heat increasing cooling demand and decreasing the amount of gas injected into storage into early June allowed the entire front of the strip to rally over the past week, with contracts diverging just a bit today into June options expiry.

Already natural gas power burns have begun getting elevated for the heat that is building across the country. This comes as nuclear power plant outages continue to run far below average and year-ago levels, limiting the amount of additional gas being burned for power and keeping burns from being quite as high.

Preliminary power burn estimates for today still already show burns running far above year ago levels and much closer to 2016 levels thanks to recent heat, regardless of those limited nuke outages. These are expected to be revised a bit higher later as well, as they were yesterday.

Every day we measure relative weather-adjusted tightness of power burns, industrial gas demand, and residential/commercial demand to indicate how natural gas price risk is skewed and the relative importance of either Gas Weighted Degree Days (GWDD) increases or decreases. In yesterday's Afternoon Update we noted that we were not particularly impressed by weather-adjusted balances, but saw room for recent hot trends to bring one last small spike in prices like played out this morning before the impact of relatively loose balances and long-range cooler risks could limit the rally.

This is generally what played out today, with our neutral sentiment verifying as prices were mostly flat and the October/January V/F spread actually came in exactly flat.

Attention into next week now turns to some long-range cool risks as we continue to see the natural gas market be significantly weather-driven. In our recent Pre-Close Update for clients we broke down how we expected models to trend over the holiday weekend as well as what our latest reading of weather-adjusted power burns was and where spreads seem to indicate price risk existed into early next week. This followed up our Note of the Day where we took a closer look at the Week 3 forecast and relative power burns over the last week.