November natural gas futures, set to expire Monday, were down 6.5 cents to $3.120/MMBtu shortly before 9 a.m. ET Monday, with forecasts producing warmer near- and medium-term trends over the weekend as the latest production numbers continue to climb. The December contract was trading 6.6 cents lower at $3.159.
Gas-weighted degree day totals should hover near five-year averages for the next two weeks, according to Bespoke Weather Services.
“Weekend model guidance trended significantly warmer in the short- and medium-range, ticking up cold risks through much of the long-range but seeming to indicate that those cold risks are mostly temporary as the pattern is then seen breaking down warmer into Week 3,” the firm said.
Bespoke pointed to “mixed signals” for natural gas, including looser power burns and soaring production on the one hand, with near record-level liquefied natural gas exports and limited Canadian imports on the other.
Expectations are for another loose storage report from the Energy Information Administration on Thursday, “and already the whole strip is off significantly today on warmer short- and medium-range forecasts with record production,” Bespoke said. “Lingering firm cash prices may provide a bid into November contract expiry given some mid-November cold risks that are on guidance, but short-term demand is not all that impressive, so we doubt cash will be either; eventually $3.10 December seems likely through the week.”
EBW Analytics Group similarly observed a loss of 7.7 gas-weighted heating degree days (HDD) in the 10-day forecast window, partially offset by a small increase in demand in the 11-15 day window.
“The gas market is reacting strongly to the near-term loss in demand in early trading this morning, with the November contract as low as $3.111 on its last day of trading,” EBW CEO Andy Weissman said. “Looking past the 15-day cut-off used by most forecasters, however, cooler weather is expected to extend for several more days, resulting in a net gain of 17 Bcf in Week 3 -- more than offsetting the loss in Week 2.
“While uncertainty in the American and European models is high, if the forecast for a significant increase in demand persists, the December gas contract could start to rebound after it becomes the front month.”
Genscape Inc.’s daily pipe production data showed Lower 48 output topping the 86 Bcf/d mark over the weekend as supply continued to establish record highs, according to the firm.
“The gains come, though, as the relative cold across the eastern half of the country gets winter demand season off to an early start,” Genscape senior natural gas analyst Rick Margolin said.
The firm’s daily supply and demand data for Monday showed demand at 63.4 Bcf/d, climbing to 67.3 Bcf/d by Friday (Nov. 2).
“Genscape meteorologists are forecasting Lower 48 population-weighted HDDs will be touching 90 HDDs by then, about 10 HDDs above normal,” Margolin said. “Last year the same week also saw what -- in a historical context -- was a rather early boost to demand levels. During the average of the previous five years same date, demand typically doesn’t crest the 67 Bcf/d level until the second week of November.”
December crude oil was trading 12 cents lower at $67.47/bbl shortly before 9 a.m. ET, while November RBOB gasoline was up fractionally to $1.8193/gal.