December natural gas futures were trading 4.2 cents higher at $3.240/MMBtu shortly before 9 a.m. ET Tuesday, with forecasters pointing to colder trends overnight for the second week of November sandwiched between milder spells.
The overnight weather data trended slightly colder for a weather system Nov. 8-10 but with “mild and unimpressive” conditions for much of the country Nov. 11-14, according to NatGasWeather. The data also maintained milder trends for the first week of November, the firm said.
“Overall, there will still be swings in demand every several days between below normal and near normal,” NatGasWeather said.
The background state remains bullish with this week’s Energy Information Administration storage report likely to widen deficits, which should then narrow modestly with the following two reports, according to the firm.
“We continue to view $3.13-3.14 on the December contract as strong support, especially since it held the past two sessions, as it did with the November contract for most of October,” NatGasWeather said. “If prices rally, it would be the result of a continued bounce after hitting strong support, aided by hefty multi-year deficits. The overnight data was a little colder” during the second week of November, “although that’s likely seen being countered by warmer trends before and an unimpressive pattern in most datasets after.”
Last week saw the start of significant flows to the first train of Cheniere Energy Inc.’s Corpus Christi liquefied natural gas (LNG) facility in South Texas as it undergoes commissioning, according to global consulting firm Energy Aspects. Meanwhile, Cheniere’s Sabine Pass feedgas flows hit an all-time high on Oct. 24 at 3.5 Bcf/d, indicating the start of commissioning flows to the Louisiana export facility’s fifth train, the firm said.
“First LNG is expected at Train 5 by year-end, which makes it likely that it is receiving some gas now in advance of that timeline,” Energy Aspects said. The additional LNG feedgas flows have helped push structural demand higher as winter approaches, according to the firm.
“With commercial weather forecasts now calling for a return to warmth in November after a burst of cold at the end of the shoulder season, futures trading is likely to move in sympathy with forecasts,” Energy Aspects said. “Though our end-of-season forecast has inched back up toward 3.19 Tcf, that level will keep cash supported,” especially as gas-weighted degree days “move up in ensuing weeks and structural demand has shifted some 0.5 Bcf/d higher on new LNG demand. Ebb and flow in daily weather and the choppiness of pre-commissioning LNG flows will dictate the level of that support.”
Looking at the technicals, ICAP Technical Analysis analyst Brian LaRose noted following Monday’s session that the bears tried and failed for a second time to force natural gas below the $3.113 level.
“As I noted coming into the week, a reversal is only step one in the bottoming process,” LaRose said. “That means the bulls need a rally Tuesday. No follow through, no bottom. I see a good chance the December contract challenges $3.110-3.086-3.060-3.051 as well in this situation.”
Shortly after 8 a.m. ET, December crude oil futures were trading 59 cents lower at $66.45/bbl, while November RBOB gasoline was trading fractionally lower at $1.8168/gal.