Natural gas futures fell for the second day in a row on Friday as traders pondered forecasts for milder temperatures, the specter of slowing demand and the potential for stronger storage injections at to come.
October’s Nymex contract fell 23.0 cents day / day to settle at $ 5.105 / MMBtu. November fell 23.6 cents to $ 5.146.
Spot Gas National Avg from NGI. lost 19.0 cents to $ 5.150, dragged lower by declines in Texas.
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The weather forecast for the remainder of September dipped again on Friday – after losing several cooling degree days (CDD) on Thursday – signaling the potential for solid increases in inventory in the weeks ahead. This allayed fears of a weak storage trajectory ahead of the peak winter demand season. Such fears had fueled a major rally earlier in the week that took futures contracts to 2021 highs.
“Reduced CDDs outweigh ‘minor gains’ in heat demand,” giving us a slightly lower appearance of demand overall and a lower than normal demand pattern overall for the rest of the month, “Bespoke Weather Services said Friday.
The firm said the outlook for October, meanwhile, shows above-average temperatures, although at this time of year the heat translates into mild temperatures that neither galvanize heat demand nor galvanize heat demand. cooling.
“It’s still early in the weather game, but these trends will start to become more prominent over the next couple of weeks,” Bespoke said. The latest forecast was “not enough to end the bullish story, but in our opinion pushes things to the point where we will need to see a decent chill” to consistently support futures above 5, $ 00 this fall. “Until we see the weather, volatility probably reigns.”
Liquefied natural gas (LNG) export levels from the United States also declined over the past week – down more than 2 billion cubic feet per day from the previous week – after the hurricane Nicholas hit the Gulf of Mexico (GOM) and cut power at the Freeport LNG terminal near Houston. .
The latest US Energy Information Administration (EIA) storage report has helped allay concerns about supply. The EIA on Thursday reported an injection of 83 billion cubic feet into natural gas storage for the week ending September 10, more than the 70 billion cubic feet predicted by major surveys.
If mild conditions prevail in the coming weeks and utilities add similar levels to stocks, Bespoke said the market would be on track for 3.5 Tcf of underground supplies for the winter. That’s well below the previous year’s level of around 3.9 Tcf, but the company said it could prove to be sufficient unless an extremely cold winter.
In addition to beating estimates, the latest generation also fell to the bearish side of the five-year average for the period, analysts at Tudor, Pickering, Holt & Co. (TPH) said. US inventories ended the period with a shortfall of about 7% from the five-year norm.
“Our projections suggest that the natural gas market may continue to reduce the deficit through most of September, following the slowdown in demand for post-Nicholas LNG feed gas” and “recent changes in weather forecast indicating a more bearish outlook for late September and early October, ”said EBW Analytics Group.
That said, production held steady at about 92 Bcf / d for much of the summer and dropped to about 90 Bcf as a result of Hurricane Ida in late August. The production disruptions in GOM persisted until the first half of September. In addition, the recent decline in LNG is expected to be temporary. Demand for LNG exports to meet energy needs in Asia and Europe remains high and is expected to increase supply this fall as both continents grapple with supply issues.
Some analysts have said if weather demand reappears and production remains modest, storage concerns could quickly resurface. Analysts at The Schork Report noted on Friday that an inevitable rebound in LNG in the coming weeks will bolster aggregate demand and likely prices.
“Bottom line,” Schork analysts said, “US LNG shipments will remain strong, further strengthening the strength of Nymex natural gas.”
NatGasWeather offered a similar assessment on Friday: “On the bullish side, global supplies remain tight, particularly in Asia and Europe, a situation that is unlikely to improve much in the coming months. This makes the most anticipated upcoming winter season for over a decade in the northern hemisphere. The bulls are obviously hoping for a colder-than-normal winter to materialize as it could cause prices to skyrocket even more. “
Spot gas prices extended a decline to a second day, with hubs across the country recording losses.
NatGasWeather said Friday’s forecast showed stable weather-related demand throughout the weekend and into the start of the next trading week. However, by the middle of the week and through September, most of the United States is expected to experience “perfect ’70s and’ 80s highs, in addition to the warmer ’90s locally in the Southwest and colder 60s in the northern plains ”.
With that on the horizon, spot prices retreated from the highs reached earlier in the week.
The largest declines were recorded in Texas. El Paso Permian lost 29.5 cents day / day to $ 4.760, while Waha lost 29.0 cents to $ 4.770 and Oneok WesTex lost 38.0 cents to $ 4.700.
Elsewhere, Chicago Citygate lost 21.5 cents to $ 5.040 and Columbia Gas lost 30.0 cents to $ 4.750. In the west, SoCal Citygate lost 66.5 cents to $ 7.255.
For the coming week in particular, NatGasWeather said the Midwest and Northeast “will be comfortable with highs of 70 to 80 as weak cold fronts follow one another with showers,” while California until ‘West Texas will be hot’ with highs of 80 to 100 upper pressure rules.
During the last week of the month, the southern part of the country is expected to be warm – albeit pleasant with highs in the 80s in many markets – and the Midwest to the northeast is expected to experience mild temperatures in the 70s. and 80. While it is still warm in the Southwest and parts of California, the Northwest and the Rockies “will be mild and early showers with highs from the 60’s to the 70’s as the Pacific systems will pass, ”NatGasWeather said.
Overall, the forecaster said, “weather conditions are quite bearish for the next 15 days for the weakest domestic demand in months.”
“As for the tropics,” the company added on Friday, “Nicholas has fizzled out, but there are a few other tropical systems of interest left, one grazing the Mid-Atlantic coast for the next two days, while a second system is heading to the Caribbean this weekend “, but it is” unlikely to stay on course to the United States “