With the latest forecasts still showing a bearish pattern for the start of June, natural gas futures were trading several cents lower early Tuesday. The June Nymex futures contract was down 3.2 cents to $2.641/MMBtu shortly after 8:30 a.m. ET, reversing off of the prior session’s 4.2-cent rally.
The overnight data maintained hotter trends starting Memorial Day weekend and continuing into next week as the models dropped a small amount of demand from the outlook, according to NatGasWeather.
“However, the data remained rather bearish for the start of June, with high pressure weakening for easing heat across the southern U.S.,” the forecaster said. “But with the weather data consistently adding demand the past several weeks, the next several” weekly Energy Information Administration storage builds are now on track to come in “much closer to 100 Bcf instead of once looking more like 110-120 Bcf.
“...No change bigger picture as we view the natural gas markets as being satisfied bullish demand trends continue through early next week, although are still likely to view the pattern around the start of June as not hot enough to impress.”
Pipeline scrape reports showing a production drop of nearly 2 Bcf/d compared to last Friday’s output likely provided the catalyst for Monday’s rally, according to EBW Analytics Group.
“The decline appears to be attributable primarily to a short-duration maintenance outage on the Columbia system,” EBW CEO Andy Weissman said. “Over the past several months, however, the market has frequently reacted to daily fluctuations in production as indicators of longer-term trends.
“The direction of today’s trading is difficult to predict. A double top formation intraday yesterday suggests that prices will decline before moving higher, especially if yesterday’s reported production declines reverse soon,” he said. “The continued upward price trend, however, cannot be lightly ignored, and could lead gas prices even higher despite the underlying bearish fundamentals.”
Based on month-to-date production trends as of late last week, Energy Aspects said in a recent note to clients “it would be unwise to gloss over the impacts of a heavy maintenance season” on supply during the shoulder months.
“Before the start of May, our estimate for month/month growth was 0.5 Bcf/d,” the firm said. “Given an essentially flat production reading” for last week, “there is some risk that the number will fall toward 0.3-0.4 Bcf/d month/month, even assuming a moderate clip of weekly gains on the order of 0.2-0.3 Bcf/d through the end of the month.
“Looking at basin-level production flow data, no single region stands out as an outperformer,” according to Energy Aspects. “The typical driver of sequential growth, Appalachia, has registered a 0.2 Bcf/d month/month decline on a month-to-date basis, according to flow data.
“Permian production has come off month/month, according to our sample, with a 0.5 Bcf/d gap between this month’s peak daily production and its lowest, as we have seen more maintenance and also some price-responsiveness from producers choking back/shutting in output.”
June crude oil futures were up 32 cents to $63.42/bbl just after 8:30 a.m. ET, while June RBOB gasoline was up fractionally to $2.0160/gal.