December natural gas futures were surging 13.5 cents higher to $3.678/MMBtu shortly before 9 a.m. ET, with overnight guidance adding to medium-range heating demand expectations as cash prices look to climb heading into the weekend on wintry temperatures.
Bespoke Weather Services tallied gas-weighted degree day (GWDD) gains across all guidance overnight, seeing a third weaker cold shot likely to move in following two very strong cold shots arriving over the next week.
“Our sentiment has ticked slightly bullish as prices began shooting higher this morning on increased medium-range cold risks and expectations of very strong cash prices,” Bespoke said. “We had been looking for strong cash prices into the weekend as significant cold arrives tomorrow and lingers through the next week, but had expected to see a stronger long-range warm signal on models to help counteract any cash strength.
“Now, we no longer have as strong a long-range warm signal and instead see production still off highs, imports still very low and burns revised slightly tighter,” the firm said. “Between a daily balance picture that is still relatively tight, model guidance that is struggling with the medium-term pattern and has now added” heating degree days “in consecutive runs, and expectations of cash running up over the $3.70 level today, we could easily see the front of the natural gas strip move towards the $3.70 level today before any reversal on long-range warmth takes place.”
Meanwhile, on Thursday the Energy Information Administration (EIA) reported a 65 Bcf injection into U.S. gas stocks for the week ended Nov. 2, surprising to the high side of most estimates. That compares to a 22 Bcf build recorded in the year-ago period and a five-year average injection of 48 Bcf. Total Lower 48 working gas in underground storage stood at 3,208 Bcf as of Nov. 2, down 580 Bcf (15.3%) from last year and 621 Bcf (16.2%) below the five-year average, according to EIA.
“Expectations this week were clearly for a smaller build,” said Genscape Inc. analyst Margaret Jones. “...Compared to degree days and normal seasonality, the 65 Bcf injection is about 3.8 Bcf/d loose versus the five-year average. Next Thursday’s number will be one more build before a hefty draw as cold-weather demand ramps up into next week.”
Deficits should marginally improve with next week’s reported build, but “they’re set to balloon two EIA reports out on next week’s much colder than normal temperatures,” according to NatGasWeather. “This should keep the background state solidly bullish, where even a neutral pattern is likely to be considered cold enough since it would keep deficits from improving, buying time until more ominous cold proves returns.
“The focus of the midday and afternoon updates will be on if the milder European model Nov. 22-24 trends colder, or if the colder” Global Forecast System trends milder for this period, the firm said. This could prove “another potentially dangerous weekend to hold...depending on which one ultimately wins out.”
December crude oil futures were down $1.04 to $59.63/bbl shortly before 9 a.m. ET, while December RBOB gasoline was trading about 2.5 cents lower to $1.6190/gal.