Lacking a clear weather catalyst, natural gas futures continued to slip in early Friday trading. The June Nymex futures contract was off 1.8 cents to $2.577/MMBtu at around 8:30 a.m. ET.
Forecast demand increased slightly in the latest models as of early Friday, with American and European datasets adding a mix of both heating degree days (HDD) and cooling degree days (CDD) for the next couple weeks, according to Bespoke Weather Services.
“Demand for the upcoming week is now basically normal, though boosted more by HDDs in the north, as CDDs remain slightly below normal due to cooling from Texas across the remainder of the South,” Bespoke said. “As an upper level trough becomes more pronounced over the West in week two, warmth spreads into the eastern half of the nation, leading to slightly higher demand with 85-90 degree temperatures across the southeast quadrant of the nation.
“Models do weaken the eastern warmth at the end of week two, however, bringing demand back toward normal levels as we move into the Memorial Day weekend.”
The latest data had balances looking “rather unimpressive once again” early Friday, including looser power burns corresponding with a reduction in nuclear outages this week, the firm said.
“Should cash prices look weak later this morning, we could test the $2.55-2.56 zone, given the weak data, though with risk of some CDDs still present in week two, prices should continue finding some support at that level,” Bespoke said.
Meanwhile, the Energy Information Administration (EIA) on Thursday reported an above-average 85 Bcf weekly injection into U.S. natural gas stocks, matching the 85 Bcf build recorded for the year-ago period but larger than the 72 Bcf five-year average. Total Lower 48 working gas in underground storage stood at 1,547 Bcf as of May 3, 128 Bcf (9.0%) more than year-ago levels but 303 Bcf (minus 16.4%) below the five-year average.
Genscape Inc. analysts viewed the 85 Bcf figure as about 4.5 Bcf/d looser than the five-year average when compared to degree days and normal seasonality.
Analysts with Tudor, Pickering, Holt & Co. said the market was about 3 Bcf/d oversupplied on a weather-adjusted basis, tighter compared to a 5 Bcf/d oversupply for much of April, which corresponds with maintenance-related reductions in liquefied natural gas (LNG) feed gas demand.
“Right now it seems like the gas market can’t catch a break, as just as LNG volumes have returned (currently 5.7 Bcf/d), weather has become uncooperative,” the TPH analysts said. “Preliminary data for next week shows a roughly 4 Bcf/d decrease in residential/commercial demand, but with no corresponding increase in power generation, we’re forecasting a return to triple-digit builds versus norms of 90 Bcf.”
In Thursday’s trading, bulls were unable to build on the momentum from a sharp rally the day before, noted EBW Analytics Group CEO Andy Weissman.
“This weakness was due in part to a (predictable) upward correction in production estimates using pipeline scrape data that had been published earlier in the week,” Weissman said. “Traders hoping for a bullish injection were also disappointed by an EIA-reported 85 Bcf build yesterday -- matching the consensus forecast.
“At the same time, support for the June contract continued to hold just above $2.56,” he said. “With cash market prices most likely dropping as we head into the weekend, futures could slip further today. The most likely scenario, though, is that futures will continue to trade within a narrow range for the next few trading sessions.”
As of 8:30 a.m. ET, June crude oil futures were up 20 cents to $61.90/bbl, while June RBOB gasoline was up around 2.7 cents to $2.0019/gal.