A stable outlook from overnight forecasts and an increasingly comfortable storage picture had March Nymex natural gas futures trading close to even early Friday, with the prompt month trading about 2.1 cents higher at $2.594/MMBtu shortly before 9 a.m. ET.
NatGasWeather viewed the overnight guidance as little changed, with forecasts still showing strong demand this weekend and into next week before milder conditions move into the East late next week through Feb. 26. It’s the pattern in the East late next week that “just isn’t cold enough to impress” markets, the forecaster said.
“Most of the data favors subfreezing air pushing back across the Ohio Valley and Northeast Feb. 28-March 3 in what currently appears like a plenty cold enough pattern with stronger than normal demand,” NatGasWeather said. “But will it hold in the weather data through the weekend? To our view, the weather data is likely to trend a little milder Feb. 21-26, but colder trends have better odds” for the last few days of February into early March.
In other words, the two-week outlook period looks “cold enough early and late, but the mild break over the East in the middle really stands out,” the forecaster said. The focus for midday data will be whether “cold can continue to look intimidating enough Feb. 27-March 3, which there’s decent potential for.”
The risk for winter weather to cause any significant price spikes is rapidly fading, EBW Analytics Group CEO Andy Weissman said.
“While the overall picture is bearish, the forecast for the next three weeks calls for colder-than-normal weather every day,” Weissman said. “This is most likely already fully priced into the market. With storage currently on a trajectory to end the withdrawal season at a comfortable level, if this forecast validates, natural gas price movements are likely to be limited.
“The opportunity for extreme cold weather this winter is most likely over,” he said. “Soon, traders will start looking at weather in the second and third weeks of March. There are signs that temperatures will shift warmer. If they do, further declines are likely later this month.”
The Energy Information Administration (EIA) on Thursday reported a smaller-than-expected 78 Bcf withdrawal for the week ended Feb. 8, putting inventories at 1,882 Bcf, 30 Bcf below last year and 333 Bcf below the five-year average.
Genscape Inc. said the 78 Bcf pull indicates the market was about 4.7 Bcf/d loose versus the five-year average compared to degree days and normal seasonality.
Analysts with Tudor, Pickering, Holt & Co. (TPH) said the withdrawal figure indicates the market was about 4.0 Bcf/d oversupplied adjusting for weather.
“Month to date, February has been more than 3.0 Bcf/d oversupplied on a weather-adjusted basis, a roughly 2.0 Bcf/d increase from the January average” of roughly 1.0-1.5 Bcf/d of oversupply, the TPH team said. “The 15% deficit to the five-year norm remains a function of inventories entering the 2018/19 injection season at a roughly 600 Bcf deficit...meaning that season to date, supply adds have equaled demand adds.”
However, despite roughly 6% more total degree days than normal, “cumulative 2018/19 withdrawals are 16% below average,” according to the analysts. “Though we admittedly sound like a broken record, we continue to expect record supply keeping periodic cold spells in check before inventories begin building aggressively in April/May.”
March crude oil was trading 51 cents higher at $54.92/bbl shortly before 9 a.m. ET Friday, while March RBOB gasoline was up about 1.6 cents to $1.5243/gal.