September natural gas opened Tuesday about 0.9 cents lower at around $2.867/MMBtu as forecasts overnight continued to show what could be the last real heat of summer waning by the end of next week. The October contract was set to open 1.2 cents lower at around $2.857.
Overnight guidance maintained a pattern that is bullish until around Sept. 7, thanks to heat this week and next, then it is forecast to be neutral to bearish after that, according to NatGasWeather.com.
“The data still advertises a more comfortable U.S. pattern arriving Sept. 8-10 across the northern and eastern U.S., but with continued timing differences between the weather models on exactly when cooler conditions will arrive,” the firm said. “...Next week’s heat could very well be the last hurrah of summer as the upper ridge quickly weakens after Sept. 7-8 with any late season heat being confined to the southern tier.
Prices continued to sell off from last Friday, with the October contract “now well under $3. This suggests the markets aren’t liking seeing production hit yet another record and summer heat waning after next week,” the firm said. Once the September contract expires Wednesday, “trade will reveal if this selloff is for real or if bulls return to buy the dip.”
Global consulting firm Energy Aspects said recent production data indicates another surge in output after volumes were steady around 80.5 Bcf//d for most of July.
“If the recent 82.5-plus Bcf/d daily readings hold, our initial estimate for a 1 Bcf/d month/month increase” in August “will look too light assuming no major maintenance for the remainder of the month, with a figure closer to 1.5 Bcf/d” more likely, Energy Aspects said. “Yet, end-October storage is still on track to be below 3.4 Tcf, despite such a stark rise in production.
“...Appalachia has been hitting new production daily peaks at 28.7-28.9 Bcf/d from Aug. 17, even in the absence of new takeaway capacity,” the firm said. “Given the delays to infrastructure starting up, such as with Atlantic Sunrise, part of this boost could be from wells that were drilled in anticipation of pipes beginning operations this summer.”
After Monday’s selloff, with pipeline capacity coming online soon and air conditioning demand likely to taper off next month, bulls appear to have given up on rallying the September contract, according to EBW Analytics Group CEO Andy Weissman.
“With September options expiring today and final settlement Wednesday, trading during the next two days is likely to be governed primarily by the market dynamics associated with final settlement, which may not be indicative of price movements later this week,” Weissman said. “Given the clear shift that has occurred in market sentiment, however, further declines are likely.”
October crude oil was set to open about 19 cents higher at around $69.06/bbl, while September RBOB gasoline was trading about a penny higher at around $2.1003/gal.