Natural gas futures were trading slightly higher early Friday, with the overnight forecasts still pointing to above-normal weather-driven demand for next week. The June Nymex futures contract was up 1.4 cents to $2.653/MMBtu shortly after 8:30 a.m. ET.
The overnight guidance maintained above-normal heating degree day (HDD) and cooling degree day (CDD) totals through next week, but the pattern for late May continued to look “rather unimpressive,” according to NatGasWeather.
The Week 1 outlook is “slightly bearish,” with Week 2 having a more “strongly bearish” lean to it. The Week 2 period could add demand as it draws closer, something that has happened over the past few weeks, the forecaster said.
“But even with added demand trends, weekly builds continue to run larger than normal,” giving weather sentiment a “bearish bias,” NatGasWeather said. “What this also reveals is that even with solidly above normal daily national HDD/CDD totals, production has become too strong,” resulting in larger-than-normal builds despite the weather-driven demand.
The Energy Information Administration (EIA) on Thursday reported a 106 Bcf injection into U.S. gas stocks for the week ended May 10, versus a 104 Bcf build recorded in the year-ago period and a five-year average 89 Bcf injection. Total Lower 48 working gas in underground storage stood at 1,653 Bcf as of May 10, 130 Bcf (8.5%) above year-ago levels but 286 Bcf (minus 14.7%) below the five-year average, according to EIA.
“On a weather-adjusted basis, the market is currently around 2 Bcf/d oversupplied, down from a 3 Bcf/d oversupply last week,” according to analysts with Tudor, Pickering, Holt & Co. (TPH). They attributed the tighter balances to liquefied natural gas (LNG) and Mexico export volumes that “continue to ramp up; current flows show combined exports at 10.6 Bcf/d, up from a trailing 30-day average of 9.4 Bcf/d.
“We expect the market to move toward balance over the summer as LNG projects ramp up, and Mexican exports are expected to get a lift in late June from the Sur de Texas pipeline,” the TPH team said. “LNG demand will be key to watch over the next couple weeks, as flow data shows Cameron LNG began shipping its first gas this week, beginning a ramp to around 0.6 Bcf/d of feed gas demand.”
Meanwhile, the spring nuclear outage season is “winding down rapidly,” including 1.95 GW of capacity restored over the past week, according to Genscape Inc. senior natural gas analyst Rick Margolin.
“Outages peaked in early April. Current levels on outage are now down to their lowest point since the end of February, with additional reductions slated to occur in the next several days,” Margolin said. “The volume of capacity on outage this spring peaked on April 1 at 22.45 GW. By the start of May there was 16.48 GW on outage. Current capacity on outage stands at 10.3 GW.”
June crude oil futures were up 35 cents to $63.22/bbl shortly after 8:30 a.m. ET, while June RBOB gasoline was up fractionally to $2.0696/gal.