Natural gas futures were down more than a nickel in early Monday trading as the latest forecast data over the weekend pointed to cooler long-range trends following near-term heat. The August Nymex futures contract was trading 5.4 cents lower at $2.254/MMBtu shortly after 8:30 a.m. ET.
The weekend weather models showed cooler trends in the 11-15 day period arriving slightly later than previously expected, according to Bespoke Weather Services.
“This week remains easily the hottest that we have seen so far this summer, with widespread 90s in the eastern half of the nation, and even some spotty 100 degree highs in parts of the Southeast,” Bespoke said. “The pattern begins its transition into next week, still with some lingering above normal heat in parts of the East in the first half of the week. Then by the 11-5 day, we favor a pattern cooler than the models explicitly show, at least toward the Midwest, given the upper level pattern clues.”
Meanwhile, the latest data on balances was “all over the place” heading into Monday’s trading, according to the firm.
“Production rose to levels almost even with the highs from late March over the weekend, only to show a huge drop today,” Bespoke said. “These drops are common at the beginning of a new month, however, which is why the market is, for now, ignoring it.” Liquefied natural gas feed gas demand “is also shown lower this morning, a full Bcf off its highs.”
Radiant Solutions pointed to a round of troughing into the eastern half of the Lower 48 that was driving cooler changes for the Midwest and South in its latest 11-15 day forecast.
“The period averages in the above normal category in the West, including much aboves in spots during the early half,” Radiant said. “Farther east, unsettledness leaves temperatures closer to normal in the Plains, Midwest and Northeast...the South continues to lean on the warm side of normal.”
In the six- to 10-day period, Radiant highlighted a “small cool change” compared to earlier expectations for the West Coast and also from the Midwest into the Mid-Atlantic.
“A round of low pressure tracks through the eastern third to start the period, with above normal temperatures preceding along the East Coast. Peaks in the low 90s are from Washington, DC, to Boston on Day 6. A cooler air mass follows for the Midwest and Northeast around mid-period,” Radiant said. “Near normal temperatures are in the West during the early half, but more intense aboves emerge late under a building ridge.”
With a holiday-shortened week of trading kicking off, EBW Analytics Group CEO Andy Weissman said there are two conflicting drivers at work in the market.
“This week, as the July Fourth holiday approaches, we expect commercial and industrial demand to begin falling off rapidly, depressing cash prices,” Weissman said. “The market is likely to be mindful, however, that if current weather forecasts verify, power sector demand for natural gas could rise sharply after the holidays, strengthening the cash market and cutting weekly injections by more than 50% compared to recent levels.
“Faced with these competing factors, natural gas is unlikely to make a significant move either up or down prior to the holiday,” he said. “After July Fourth, however, the stage could be set for gains of 10% or more during the first few weeks of July.”
August crude oil futures were up $1.65 to $60.12/bbl shortly after 8:30 a.m. ET, while August RBOB gasoline was up 4.8 cents to $1.9446/gal.