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Is Cold Convincing NatGas Bulls? February Adds a Dime Overnight

February natural gas was set to open about 11 cents higher at around $2.846 Thursday, as weather data suggested the current cold blast -- expected to extend well into the first week of the new year -- could stick around a bit longer.

"Back to back nights we have seen weather turn markedly colder now, with modeling guidance continuing to show significant cold risks lingering longer than previously expected," said Bespoke Weather Services in a Thursday morning note to clients.

"Now we are seeing risks that some of the strongest cold could come again Jan. 4-6 before gradually moving out, and with long-range guidance not quite as warm we added just over 20 gas-weighted degree days overnight."

After breaking through $2.75, a test of $2.84 quickly followed, Bespoke said.

"Resistance from $2.84-2.88 should be tested today, though," as the Energy Information Administration's (EIA) storage inventory report "is likely to be a bit looser week-over-week." With current weather, "a series of very large withdrawals" could be in store.

Predictions have been rolling in for EIA’s 10:30 a.m. EDT release, showing another triple-digit withdrawal could be in play for the week ending Dec. 22. Last week, EIA reported a 182 Bcf withdrawal.

A Reuters survey of traders and analysts called for an average withdrawal of 113 Bcf from U.S. gas stocks for the week ending Dec. 22, with responses ranging from -107 Bcf to -176 Bcf. Last year, 233 Bcf was withdrawn, and the five-year average for the period stands at -111 Bcf.

Stephen Smith Energy Associates, in a report issued over the holiday weekend, predicted a 107 Bcf withdrawal. The firm said this compares to a seasonally normal draw of 82 Bcf, based on 2006-2010 norms.

PointLogic Energy on Tuesday predicted a withdrawal of 111 Bcf, pointing to higher production week/week and a decline in demand "spread across the middle and eastern half of the country" for the period. ION Energy's Kyle Cooper called for a 109 Bcf withdrawal.

INTL FCStone Financial Inc.'s Tom Saal, senior vice president, said Wednesday the longs may need more convincing as far as weather.

After some lackluster storage withdrawals earlier in the heating season, "and then we had an injection on top of that a few weeks ago, that just slammed the door on them,” Saal said. “So now we're going to need something." But with a couple large withdrawals and some cold weather, "we'll see what happens.”.

February crude oil was set to open flat Thursday at around $59.65/bbl, while January RBOB gasoline was down fractionally at $1.7860/gal.

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