The January natural gas futures contract was trading 17.5 cents higher at $3.901/MMBtu shortly before 9 a.m. ET Thursday as forecasters pointed to a stretch of colder temperatures expected to drive higher than average demand to close out the year.
Bespoke Weather Services said overnight guidance continued trends observed Wednesday, showing a “decent cold shot” arriving by the end of the month that would lift gas-weighted degree days (GWDD) back above average.
“Early indications are that such a cold shot will not be particularly sustained; model guidance is consistent with another round of warmth in the first week of January that would then pull GWDDs back below average,” Bespoke said. “However, that also looks to be brief as we gradually step down into a colder pattern, and we do see colder risks increasing into Week 3 as well.
“...The natural gas market remains incredibly jumpy, spiking on the first real bullish news, and thus we cannot rule out $4 being in play even by the end of the week,” the firm said.
A large draw is expected Thursday from the Energy Information Administration’s (EIA) latest weekly storage report, with Bespoke calling for a 133 Bcf withdrawal that is “not particularly tight” but “still is a large storage pull on aggregate.”
Estimates for EIA’s report, due out at 10:30 a.m. ET, have been pointing to a withdrawal in the low to mid-130 Bcf range for the week ending Dec. 14. Kyle Cooper of IAF Advisors projected a 133 Bcf draw, while EBW Analytics Group expected a 145 Bcf pull. A Bloomberg survey of 11 market participants had a range of 118 Bcf to 146 Bcf with a median draw of 135 Bcf. A Reuters poll of 16 market participants had an even wider range, with a lowball estimate of 94 Bcf, a high of 153 Bcf and a median of 133 Bcf.
Last week, the EIA reported a 77 Bcf withdrawal, which left inventories sitting at 2,914 Bcf as of Dec. 7. Thursday’s number will be compared to both last year’s 166 Bcf draw for the week and the five-year average pull of 144 Bcf.
“It was colder than normal over the southern and eastern U.S., while warmer than normal over portions of the West and Plains” during this week’s storage report period, according to NatGasWeather, which said its algorithm predicted a pull of 139 Bcf.
As for the overnight data, NatGasWeather said it viewed the overall outlook as little changed with the latest guidance, seeing a “bearish pattern the next 10 days, a neutral to potentially slightly bullish pattern Dec. 30-Jan. 2 as colder air arrives across the eastern U.S., but then looking at least somewhat bearish Jan. 3-5 as much of the data favors a mostly mild U.S. pattern besides portions of the northern U.S.
“...If the data were to trend colder for Jan. 3-5, it would certainly go a long ways to ending or easing bearish weather headwinds,” the forecaster said. “It should be another volatile day where 20-30 cent swings are likely to continue, aided by the results of the EIA weekly storage report and midday weather trends. Bigger picture, deficits should remain near 720 Bcf, then improving in the weeks ahead toward 600 Bcf.”
February crude oil was down $1.30 to $46.87/bbl shortly before 9 a.m. ET, while January RBOB gasoline was down about 1.7 cents to $1.3698/gal.