With weather models over the weekend failing to add heat through the first third of June, and with supply expected to continue driving larger-than-normal builds, natural gas futures were trading several cents lower early Tuesday.
As of 8:30 a.m. ET, the June Nymex futures contract was trading at $2.551/MMBtu, off 4.7 cents from Friday’s settlement. The July contract, set to take over as the prompt month this week, was down about 4.8 cents to around $2.563.
Over the long holiday weekend, the weather outlook remained “very little changed” compared to expectations as of late last week, leaving forecasts with a “bearish bias until more ominous and widespread heat arrives,” according to NatGasWeather.
“It remains hot over the South and Southeast, with record-breaking highs of 90 to 100 degrees, but with the rest of the country mostly comfortable with 70s and 80s, including major cities from Chicago to the Northeast coast, national demand just isn’t as strong as needed to prevent hefty weekly builds in supplies from continuing,” NatGasWeather said.
According to the forecaster, early expectations for this week’s Energy Information Administration (EIA) storage report point to another build in the low triple-digit range, higher than the five-year average.
Energy Aspects issued a preliminary estimate calling for EIA to report a 99 Bcf injection for the week ending May 24.
“A 2.8 Bcf/d surge in gas into power week/week nearly offsets a 2.5 Bcf/d week/week decrease in residential/commercial demand” during the period, the firm said. “A nearly 0.3 Bcf/d week/week decline in production is offset by a 0.3 Bcf/d gain in net Canadian trade, leaving the injection level more or less flat week/week.”
Bespoke Weather Services viewed the weekend weather models as tending to “show a little less heat overall,” advertising fewer gas-weighted degree days during the first third of June.
The European data came in slightly weaker in terms of gas-weighted degree days, Bespoke said. However, “the 11-15 day maintains a weak trough in the Pacific Northwest, and a downstream ridge gets going in the eastern half of the nation again late in the 11-15 day period. Such a pattern would likely be hotter than the model shows currently at the surface, if it is correct.”
“...Fundamentally, the main thing that jumps out is the higher production over the weekend, although we have still yet to get back to the highs so far.” Liquefied natural gas exports “are back up closer to the highs in today’s data as well, however.”
Weather-adjusted burns over the holiday weekend stayed mostly flat, according to the firm.
July crude oil futures were trading 52 cents higher at $59.15/bbl shortly after 8:30 a.m. ET, while June RBOB gasoline was up 3.2 cents to $1.9665/gal.