With a drop in the latest production data relieving some of the recent downward pressure on natural gas prices, futures were trading slightly higher early Tuesday. At 8:30 a.m. ET, the Nymex July contract was trading 0.7 cents higher at $2.410/MMBtu.
Genscape Inc. reported a “massive” 2.3 Bcf/d day/day drop in its latest production estimate early Tuesday, a result of widespread pipeline maintenance.
“Though today’s production estimate is likely to be revised up, the preponderance of maintenance underway indicates a good portion of the drops are actual,” Genscape senior natural gas analyst Rick Margolin said. “We estimate today’s production at 85.49 Bcf/d. Of the 2.3 Bcf/d day/day drop, the East’s declines are the largest at 0.7 Bcf/d, followed by a 0.55 Bcf/d drop in Texas except for the Permian; a 0.35 Bcf/d drop along the Gulf Coast; 0.27 Bcf/d of declines out of the Rockies; and about 0.17 Bcf/d of declines from the Permian and San Juan, respectively.”
Meanwhile, the overnight forecast trends failed to help the bulls make their case, with guidance dropping demand from the outlook for next week through the middle of June, according to NatGasWeather.
“There will continue to be bouts of hot conditions across the southern U.S., although not widespread or sustained enough when considering the northern half of the country looks to be exceptionally comfortable through mid-June,” the forecaster said. “Overall, bearish weather headwinds will persist until more impressive heat builds across the southern and eastern U.S., and we continue to look to after June 17 for the first opportunity.
“Until then, massive 100 Bcf builds are expected to continue for at least the next three” weekly storage reports from the Energy Information Administration (EIA), potentially shrinking the deficit to the five-year average to around 200 Bcf.
Energy Aspects issued a preliminary estimate for a 104 Bcf build for this week’s EIA report, covering the week ended May 31. The firm had initially predicted a 35 Bcf injection in the Midwest region but said the recent force majeure on Natural Gas Pipeline Co. of America’s Segment 11 would likely drop that number closer to 31 Bcf.
“The outage and rising power demand in the Midwest, which grew by 0.5 Bcf/d day/day on May 29 to 2.6 Bcf/d, are responsible for the lower-than-expected injection in the region,” Energy Aspects said.
Looking ahead to June, the firm said it sees a 1.5 Bcf/d “looser skew” to its preliminary balances for the month, following May injections that have averaged around 2.6 Bcf/d higher year/year.
“How soft June balances ultimately materialize hinges heavily on both how cooling load shapes up and on whether the impressive 1 Bcf/d week/week jump in production” last week “can be maintained,” Energy Aspects said. “Still, our balances, which utilize the 15-day forecast and thereafter the 10-year normal, are pointing to a 2.36-2.37 Tcf end-June carryout, which equates to a 50 Bcf addition to the year/year surplus month/month.”
July crude oil futures were down 29 cents to $52.96/bbl at around 8:30 a.m. ET, while July RBOB gasoline was off around 3 cents to $1.7108/gal.