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March natural gas was set to open Friday about 6 cents lower at around $2.574 as recent warmer changes to the temperature outlook for early next month carried through overnight.
“Weather guidance continued the trend of the last 24 hours, with significant warming trends in the medium-range that keep throwing into question the accuracy of the long-range colder output,” Bespoke Weather Services said in Friday morning note to clients. “Heating demand expectations for March 2-4 have been decently decreased to the point where demand does not look to return to seasonal averages until at least March 5.”
Natural gas prices were selling off Friday morning “on further overnight gas-weighted degree day losses, as would be expected after they were unable to rally off a tight Energy Information Administration (EIA) print Thursday,” Bespoke said. “There are still lingering cold risks in the long-range that should add support, and that combined with market tightness/impressive demand figures have us continuing to see a floor in prices from $2.52-2.55.”
NatGasWeather.com similarly observed less impressive cold in the East in the latest forecasts for the March 2-5 period.
“But what the markets are likely most disappointed in is the cold blasts that follow March 6-11 have also backed off some, especially in the overnight Global Forecast System model,” NatGasWeather said. “The European remains colder than the rest of the data with it but hasn’t been quite as frigid the past two runs.
“...The onus is now solidly on the colder camp gaining momentum back or strong recent of $2.54 could again get tested. We thought the after-EIA report trade would be telling, and with prices failing to gain after a bullish miss, it suggested the markets wanted to see the Thursday data come in cold,” the firm said, adding that the March contract could see additional volatility ahead of Monday’s expiration.
EIA on Thursday reported a 124 Bcf withdrawal from U.S. gas stocks for the week ending Feb. 16, a slightly larger pull than the average predictions leading up to the report. Last year 92 Bcf was withdrawn and the five-year average is a pull of 145 Bcf. Last week, EIA reported a 194 Bcf withdrawal.
“Deviating from the last several weeks, storage numbers were finally in-line with Wall Street expectations as inventories break away from five-year minimums and market undersupply stabilizes closer to 1 Bcf/d,” analysts with Tudor, Pickering, Holt & Co. (TPH) said of this week’s withdrawal. “As February winds to a close with no major weather demand events and storage levels begin to normalize, we’re looking to the second and third quarters for supply to begin to outpace demand.
“Though we may see a brisk March, the end of winter tends to have less of an impact from a historical burn per degree perspective,” the TPH analysts said. “On the export front, look for liquefied natural gas volumes to ramp back to (or above) normal as Sabine Pass resolves temporary storage tank issues and Cove Point comes online.”
April crude oil was set to open about 10 cents lower Friday at around $62.67/bbl, while March RBOB gasoline was down fractionally at around $1.7629/gal.