January natural gas futures were trading 3.4 cents lower at $4.612/MMBtu shortly before 9 a.m. ET Friday as forecasters continued to note long-range mild trends showing cold easing into mid-December.
Overnight models showed more intense cold for Dec. 8-10 but also maintained confidence in long-range warming toward the middle of the month, according to Bespoke Weather Services.
“We have noticed that the initial cold shot expected next week has actually been trending a bit less intense on guidance, though a reload of cold after that is likely to bring even more impressive” gas-weighted degree days (GWDD), Bespoke said. “From there, confidence remains high that the upper level pattern begins to deteriorate by Dec. 10 and that into the middle of the month significant warmth moves into the East.
“This warmth increasingly appears able to make it to the East Coast as well, and does not yet show signs of breaking down beyond Dec. 15. We do note this warmth has been slightly delayed on models, but the high confidence signal is rolling forward as we see below average GWDDs by Dec. 11.”
EBW Analytics Group CEO Andy Weissman observed that the front month managed to hold support at $4.45 Thursday despite a bearish miss from the Energy Information Administration’s (EIA) weekly storage report and near-term forecasts showing warmer-than-normal temperatures.
“This impressive show of strength -- which suggests near-term downside risk is limited -- was due partially to continued bullish shifts in the Week 2 forecast,” Weissman said. “In addition, purchases of winter-month contracts for hedging by end users startled by the magnitude of recent price spikes may also be playing a role.
“Near-term, though, very warm weather this weekend is likely to put downward pressure on cash prices,” he said. “Another week-long warm spell is still expected before Christmas. Further, this afternoon’s EIA monthly production report may also add to the downward trend, potentially leading to a re-test of support at $4.49 or below.”
The EIA reported a 59 Bcf withdrawal from natural gas stocks Thursday that missed well to the bearish side of expectations. The 59 Bcf withdrawal for the week ended Nov. 23 compares to a year-ago pull of 35 Bcf and a five-year average withdrawal of 49 Bcf. Total Lower 48 working gas in underground storage stood at 3,054 Bcf as of Nov. 23, according to EIA, down 644 Bcf (17.4%) from a year ago and 720 Bcf (19.1%) below the five-year average.
“Weather-adjusted, the market was 3.5 Bcf/d oversupplied after last week’s brief stint in an undersupplied market,” analysts with Tudor, Pickering, Holt & Co. (TPH) said. “Though we believe the natural gas market will remain materially oversupplied over the short-term (and medium-term), the past few weeks have illustrated demand’s sensitivity to weather.”
The 10-14 day forecast continues to show frigid conditions for the eastern United States and the Northeast in particular, the TPH team noted.
“Having said that, supply continues to be robust, as U.S. dry production was reported as roughly 88.4 Bcf/d, or about 1.5 Bcf/d higher than two weeks ago (including the roughly 0.5 Bcf/d upward revision to production for the week of Nov. 15),” according to the TPH analysts.
January crude oil was trading 78 cents lower at $50.67/bbl as of 8:30 a.m. ET, while December RBOB gasoline was down about 2.5 cents to $1.4300/gal.