December natural gas futures were down 3.2 cents to $3.535/MMBtu shortly before 9 a.m. ET Tuesday as forecasters pointed to milder long-range trends overnight following intense cold expected to move in later this week.
The overnight weather data came in slightly colder for the middle of next week, but it was warmer trending for Nov. 17-20, showing high pressure building over the central and east-central United States and easing cold temperatures, according to NatGasWeather.
“Overall, a solidly bullish weather pattern through Nov. 16-17, then neutral Nov. 18-20,” the firm said. “Although, the markets could see the overnight data as a little bearish trending Nov. 18-20,” since both the Global Forecast System and European weather models lost several heating degree days compared to Monday’s forecast for those days.
EBW Analytics Group had estimated an additional 100 Bcf or more of projected near-term natural gas demand based on the colder forecast trends over the weekend, which sent futures prices rocketing higher to start the week.
“Over the past few months, the market has become increasingly comfortable with mid-November storage between 3,250 and 3,300 Bcf -- enough to provide a margin of safety if this coming winter is close to historical norms and production increases during the winter months are consistent with current expectations,” EBW CEO Andy Weissman said.
“If the huge shift in the models that occurred over this past weekend materializes, however, reducing mid-November storage by 100-150 Bcf, this margin of safety will be gone. After Monday’s huge gains, prices could soften slightly today. By next week, however, when the coldest weather since mid-February invades the eastern U.S., further price increases are likely.”
Meanwhile, the growth in Lower 48 production has masked an increase in exports, including new volumes flowing to Cheniere Energy Inc.’s liquefied natural gas (LNG) terminals, including the Corpus Christi Liquefaction Project near start up in South Texas, according to Energy Aspects.
“Feedgas is ramping up into Corpus Christi Train 1, which is expected to export its first cargo soon, as is also the case with Sabine Pass Train 5” from the Cheniere facility in Louisiana, the global consulting firm said in a recent note. “In addition, there appears to be some moderate ramp-up in Mexican net trade as well...If LNG feedgas flows maintain a rate near recent highs, feedgas volumes would be up nearly 1 Bcf/d month/month (m/m) in November. Another 0.1 Bcf/d m/m or so rise is possible from flows to Mexico too.
“...Once heating loads pick up, the additional uplift from net trade will have a bigger impact on balances,” Energy Aspects said. “...For price, it once more appears that trading will be a tug of war between residential/commercial demand and production, much like this summer was between cooling load and production.”
December crude oil was trading slightly higher shortly before 9 a.m. ET, up 7 cents to $63.17/bbl, while December RBOB gasoline was up fractionally to $1.6936/gal.