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Long-Range Warm Risks Seen as November Natural Gas Called Lower

November natural gas futures were trading 6.5 cents lower at $3.219/MMBtu shortly before 9 a.m. ET Thursday as forecasters pointed to risks for long-range warmer trends in the latest guidance.

Radiant Solutions noted warmer changes in its latest six- to 10-day (Oct. 16-20) and 11-15 day (Oct. 21-25) outlooks Thursday.

“A temporary flattening out of the ridge over Western Canada by a disturbance undercutting the feature brings warmer changes” to the Midwest in the six- to 10-day period, Radiant said. “Little change is made most elsewhere in a period which remains on the cool side of normal in the Eastern Half. This includes a few days with much belows in the South Central. The forecast takes a middle ground approach to the intensity of belows in the Eastern Half, where the European model points to warmer risks” versus the cooler Global Forecast System (GFS) model.

Radiant also noted a small warm change to its 11-15 day outlook based on model trends over the past 24 hours. “Much like in the six- to 10-day period, models diverge on the intensity of belows across the Eastern Half. The forecast falls between the cooler GFS and warmer European projects while applying warmer risks for the Midcontinent.”

Bespoke Weather Services viewed the overnight forecasts as mixed, including a slight increase in long-range bearish risks indicating cold could break down into Week 3 of the outlook. The firm said it still expects gas-weighted degree days to climb to well above average over the next several days, supporting cash prices and keeping weather patterns bullish for now.

“Our sentiment continues to sit slightly bearish, as we still see risk for the front of the natural gas strip skewed lower next week,” Bespoke said. “In the short-term we may very well see another spike at the front of the strip toward the $3.30 level on strong cash prices, and we note that strong cash could even linger into early next week with the arrival of significant heating demand.

“...This is a market that overall is still loosening at these higher price levels,” which the upcoming Energy Information Administration (EIA) storage report should show, “and without bullish weather would be ready to sell off,” the firm said. “Expectations that long-range forecasts warm into next week keeps at least $3.15 and maybe even $3 later on in play.”

Turning to Thursday’s 10:30 a.m. ET storage report, a Bloomberg survey of market participants had a range of 74-96 Bcf, with a median of 92 Bcf. A Reuters poll of 20 market players had a range of 86-96 Bcf, with a median build of 91 Bcf. Bespoke projected a 92 Bcf injection, while EBW Analytics expected a build of 90 Bcf.

Last year, 87 Bcf was injected into storage during the same week, while the five-year average stands at 92 Bcf. Last week, EIA reported a 98 Bcf injection into inventories, which as of Sept. 28 stood at 2,866 Bcf, 636 Bcf below year-ago levels and 607 Bcf below the five-year average.

Meanwhile, as of 8 a.m. ET, former Hurricane Michael had been downgraded to a tropical storm and was moving across the Carolinas, according to the National Hurricane Center (NHC). Michael was about 40 miles west-northwest of Columbia, SC, carrying maximum sustained winds of 50 mph.

“Michael is moving toward the northeast near 21 mph, and this motion is expected to continue with an increase in forward speed through tonight,” NHC said. “A turn toward the east-northeast and even faster forward speed are expected on Friday. On the forecast track, the center of Michael will continue to move across central South Carolina this morning, then move across portions of central and eastern North Carolina and southeastern Virginia this afternoon and this evening, and move into the Atlantic Ocean by late tonight or early Friday.”

Shortly before 9 a.m. ET, November crude oil futures were trading 83 cents lower at $72.34/bbl, while November RBOB gasoline was down about 3.3 cents to $1.9872/gal.

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